UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended July 4, 2021April 3, 2022
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13
OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______ to _______
COMMISSION FILE NUMBER 1-3619
----
PFIZER INC.
(Exact name of registrant as specified in its charter)
| | | | | |
Delaware | 13-5315170 |
(State of Incorporation) | (I.R.S. Employer Identification No.) |
235 East 42nd Street, New York, New York 10017
(Address of principal executive offices) (zip code)
(212) 733-2323
(Registrant’s telephone number)
| | | | | | | | | | | | | | |
Securities registered pursuant to Section 12(b) of the Act: |
| | | | |
Title of each class | | Trading Symbol(s) | | Name of each exchange on which registered |
Common Stock, $.05 par value | | PFE | | New York Stock Exchange |
0.250% Notes due 2022 | | PFE22 | | New York Stock Exchange |
1.000% Notes due 2027 | | PFE27 | | New York Stock Exchange |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act:
Large Accelerated filer x Accelerated filer ☐ Non-accelerated filer ☐ Smaller reporting company ☐ Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
At August 9, 2021,May 6, 2022, 5,606,688,3565,610,895,801 shares of the issuer’s voting common stock were outstanding.
| | | | | |
| Page |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
Item 2. | |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
Item 3. | |
Defaults Upon Senior Securities | N/A |
| |
Item 4. | |
Mine Safety Disclosures | N/A |
| |
Item 5. | |
Other Information | N/A |
| |
| |
| |
| |
| |
| |
N/A = Not Applicable | |
Unless the context requires otherwise, references to “Pfizer,” “the Company,” “we,” “us” or “our” in this Form 10-Q (defined below) refer to Pfizer Inc. and its subsidiaries. Pfizer’s fiscal quarter-end for subsidiaries operating outside the U.S. is as of and for the three months ended February 27, 2022 and February 28, 2021, and for U.S. subsidiaries is as of and for the three months ended April 3, 2022 and April 4, 2021. References to “Notes” in this Form 10-Q are to the notesNotes to the condensedCondensed or consolidated financial statementsConsolidated Financial Statements in this Form 10-Q or in our 20202021 Form 10-K. We also have used several other terms in this Form 10-Q, most of which are explained or defined:defined below:
| | | | | |
20202021 Form 10-K | Annual Report on Form 10-K for the fiscal year ended December 31, 20202021 |
ACIP | Advisory Committee on Immunization Practices |
ALK | anaplastic lymphoma kinase |
Alliance revenues | Revenues from alliance agreements under which we co-promote products discovered or developed by other companies or us |
AllogeneArena | Allogene Therapeutics, Inc. |
Array | Array BioPharmaArena Pharmaceuticals, Inc. |
Astellas | Astellas Pharma Inc., Astellas US LLC and Astellas Pharma US, Inc. |
ATTR-CM | transthyretin amyloid cardiomyopathy |
Biohaven | Biohaven Pharmaceutical Holding Company Ltd., Biohaven Pharmaceutical Ireland DAC and BioShin Limited. (collectively, Biohaven) |
BioNTech | BioNTech SE |
Biopharma | Pfizer Biopharmaceuticals Group |
BLA | Biologics License Application |
BMS | Bristol-Myers Squibb Company |
BNT162b2BNT162b2* | Pfizer-BioNTech COVID-19 Vaccine, also known as Comirnaty |
BOD | Board of Directors |
CDC | U.S. Centers for Disease Control and Prevention |
CGRP | calcitonin gene-related peptide |
CMA | conditional marketing authorizationauthorisation |
Comirnaty* | Pfizer-BioNTech COVID-19 Vaccine, also known as BNT162b2 |
Consumer Healthcare JV | GSK Consumer Healthcare JV |
COVID-19 | novel coronavirus disease of 2019 |
Developed Europe | Includes the following markets: Western Europe, Scandinavian countries and Finland |
Developed Markets | Includes the following markets: U.S., Developed Europe, Japan, Canada, Australia, South Korea, Australia and New Zealand |
Developed Rest of World | Includes the following markets: Japan, Canada, Australia, South Korea, Australia and New Zealand |
EC | European Commission |
EMA | European Medicines Agency |
Emerging Markets | Includes, but is not limited to, the following markets: Asia (excluding Japan and South Korea), Latin America, EasternCentral Europe, CentralEastern Europe, the Middle East, Africa and Turkey |
EPS | earnings per share |
EU | European Union |
EUA | emergency use authorization |
Exchange Act | Securities Exchange Act of 1934, as amended |
FDA | U.S. Food and Drug Administration |
FFDCA | U.S. Federal Food, Drug and Cosmetic Act |
Form 10-Q | This Quarterly Report on Form 10-Q for the quarterly period ended July 4, 2021April 3, 2022 |
GAAP | Generally Accepted Accounting Principles |
GIST | gastrointestinal stromal tumors |
GPD | Global Product Development organization |
GSK | GlaxoSmithKline plc |
HIPAA | Health Insurance Portability and Accountability Act of 1996 |
Hospira | Hospira, Inc. |
IPR&D | in-process research and development |
IRS | U.S. Internal Revenue Service |
JAK | Janus kinase |
JV | joint venture |
King | King Pharmaceuticals LLC (formerly King Pharmaceuticals, Inc.) |
LIBOR | London Interbank Offered Rate |
Lilly | Eli Lilly & Company |
LOE | loss of exclusivity |
MCO | managed care organization |
mCRC | metastatic colorectal cancer |
mCRPC | metastatic castration-resistant prostate cancer |
mCSPC | metastatic castration-sensitive prostate cancer |
MD&A | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
| | | | | |
Meridian | Meridian Medical Technologies, Inc. |
MTMmRNA | mark-to-marketmessenger ribonucleic acid |
MSA | Manufacturing Supply Agreement |
Mylan | Mylan N.V. |
Mylan-Japan collaboration | a pre-existing strategic collaboration between Pfizer and Mylan for generic drugs in Japan that terminated on December 21, 2020, which fell in Pfizer’s international first quarter of 2021 |
| | | | | |
Myovant | Myovant Sciences Ltd. |
nmCRPC | non-metastatic castration-resistant prostate cancer |
NSCLC | non-small cell lung cancer |
OPKO | OPKO Health, Inc. |
OTC | over-the-counter |
PBMPaxlovid* | pharmacy benefit manageran oral COVID-19 treatment (nirmatrelvir [PF-07321332] tablets and ritonavir tablets) |
PDUFAPC1 | Prescription Drug User Fee ActPfizer CentreOne |
PGS | Pfizer Global Supply |
Pharmacia | Pharmacia Corporation |
PRAC | Pharmacovigilance Risk Assessment Committee |
PsA | psoriatic arthritis |
QTD | Quarter-to-date or three months ended |
RA | rheumatoid arthritis |
RCC | renal cell carcinoma |
R&D | research and development |
ReViral | ReViral Ltd. |
Sandoz | Sandoz, Inc., a division of Novartis AG |
SEC | U.S. Securities and Exchange Commission |
SI&AsNDA | selling, informational and administrativesupplemental new drug application |
TSAs | transition service arrangements |
UC | ulcerative colitis |
U.K. | United Kingdom |
U.S. | United States |
Upjohn Business | Pfizer’s former global, primarily off-patent branded and generics business, which includesincluded a portfolio of 20 globally recognized solid oral dose brands, including Lipitor, Lyrica, Norvasc, Celebrex and Viagra, as well as a U.S.-based generics platform, Greenstone, that was spun-off on November 16, 2020 and combined with Mylan to create Viatris |
Valneva | Valneva SE |
Viatris | Viatris Inc. |
YTDViiV | Year-to-date or six months endedViiV Healthcare Limited |
WRDM | Worldwide Research, Development and Medical |
| |
*This Form 10-Q includes discussion of the COVID-19 vaccine that Pfizer has co-developed with BioNTech (BNT162b2) and our oral COVID-19 treatment (Paxlovid). The vaccine may be referred to by its brand name, Comirnaty (approved under a BLA), or as BNT162b2 (authorized under EUA). The vaccine is FDA-approved to prevent COVID-19 in individuals 16 years of age and older. The vaccine is authorized by the FDA to prevent COVID-19 in individuals 5 years of age and older. In addition, Comirnaty/BNT162b2 is authorized by the FDA for a third dose for certain immunocompromised individuals 5 years of age and older, as a booster dose for individuals 12 years of age and older and as a second booster dose for individuals 50 years of age and older and for certain immunocompromised individuals 12 years of age and older. Paxlovid has been authorized for emergency use by the FDA under an EUA, for the treatment of mild-to-moderate COVID-19 in adults and pediatric patients (12 years of age and older weighing at least 40 kg [88 lbs]) with positive results of direct SARS CoV-2 viral testing, and who are at high-risk for progression to severe COVID-19, including hospitalization or death. The emergency uses are only authorized for the duration of the declaration that circumstances exist justifying the authorization of emergency use of the medical product under Section 564(b)(1) of the FFDCA unless the declaration is terminated or authorization revoked sooner. The FDA has issued EUAs to certain other companies for products intended for the prevention or treatment of COVID-19 and may continue to do so during the duration of the Declaration. See the EUA Fact Sheets at www.cvdvaccine-us.com and www.covid19oralrx.com.
This Form 10-Q includes discussion of certain clinical studies relating to various in-line products and/or product candidates. These studies typically are part of a larger body of clinical data relating to such products or product candidates, and the discussion herein should be considered in the context of the larger body of data. In addition, clinical trial data are subject to differing interpretations, and, even when we view data as sufficient to support the safety and/or effectiveness of a product candidate or a new indication for an in-line product, regulatory authorities may not share our views and may require additional data or may deny approval altogether.
Some amounts in this Form 10-Q may not add due to rounding. All percentages have been calculated using unrounded amounts. All trademarks mentioned are the property of their owners.
The information contained on our website, our Facebook, YouTube and LinkedIn pages or our Twitter accounts, or any third-party website, is not incorporated by reference into this Form 10-Q.
| | |
PART I. FINANCIAL INFORMATION |
ITEM 1. FINANCIAL STATEMENTS
PFIZER INC. AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
| | | | Three Months Ended | | Six Months Ended | | | | Three Months Ended |
(MILLIONS, EXCEPT PER COMMON SHARE DATA) | (MILLIONS, EXCEPT PER COMMON SHARE DATA) | | July 4, 2021 | | June 28, 2020 | | July 4, 2021 | | June 28, 2020 | (MILLIONS, EXCEPT PER COMMON SHARE DATA) | | | April 3, 2022 | | April 4, 2021 |
Revenues | Revenues | | $ | 18,977 | | | $ | 9,864 | | | $ | 33,559 | | | $ | 19,947 | | Revenues | | | $ | 25,661 | | | $ | 14,516 | |
Costs and expenses: | Costs and expenses: | | Costs and expenses: | | | |
Cost of sales(a) | Cost of sales(a) | | 7,049 | | | 1,826 | | | 11,259 | | | 3,766 | | Cost of sales(a) | | | 9,984 | | | 4,157 | |
Selling, informational and administrative expenses(a) | Selling, informational and administrative expenses(a) | | 2,928 | | | 2,659 | | | 5,712 | | | 5,200 | | Selling, informational and administrative expenses(a) | | | 2,593 | | | 2,777 | |
Research and development expenses(a) | Research and development expenses(a) | | 2,459 | | | 2,078 | | | 4,473 | | | 3,750 | | Research and development expenses(a) | | | 2,301 | | | 1,994 | |
Acquired in-process research and development expenses(b) | | Acquired in-process research and development expenses(b) | | | 355 | | | 19 | |
Amortization of intangible assets | Amortization of intangible assets | | 931 | | | 869 | | | 1,802 | | | 1,718 | | Amortization of intangible assets | | | 835 | | | 858 | |
Restructuring charges and certain acquisition-related costs | Restructuring charges and certain acquisition-related costs | | (1) | | | 360 | | | 22 | | | 414 | | Restructuring charges and certain acquisition-related costs | | | 192 | | | 22 | |
(Gain) on completion of Consumer Healthcare JV transaction | | 0 | | | 0 | | | 0 | | | (6) | | |
| Other (income)/deductions––net | Other (income)/deductions––net | | (998) | | | (955) | | | (2,001) | | | (764) | | Other (income)/deductions––net | | | 350 | | | (1,004) | |
Income from continuing operations before provision for taxes on income | | 6,609 | | | 3,026 | | | 12,291 | | | 5,868 | | |
Provision for taxes on income | | 1,043 | | | 422 | | | 1,849 | | | 782 | | |
Income from continuing operations before provision/(benefit) for taxes on income | | Income from continuing operations before provision/(benefit) for taxes on income | | | 9,050 | | | 5,692 | |
Provision/(benefit) for taxes on income | | Provision/(benefit) for taxes on income | | | 1,172 | | | 808 | |
Income from continuing operations | Income from continuing operations | | 5,565 | | | 2,604 | | | 10,443 | | | 5,087 | | Income from continuing operations | | | 7,879 | | | 4,885 | |
| Income from discontinued operations––net of tax | | 24 | | | 893 | | | 32 | | | 1,774 | | |
Discontinued operations––net of tax | | Discontinued operations––net of tax | | | (9) | | | 1 | |
| Net income before allocation to noncontrolling interests | Net income before allocation to noncontrolling interests | | 5,589 | | | 3,497 | | | 10,475 | | | 6,860 | | Net income before allocation to noncontrolling interests | | | 7,870 | | | 4,886 | |
Less: Net income attributable to noncontrolling interests | Less: Net income attributable to noncontrolling interests | | 26 | | | 8 | | | 35 | | | 17 | | Less: Net income attributable to noncontrolling interests | | | 6 | | | 9 | |
Net income attributable to Pfizer Inc. common shareholders | Net income attributable to Pfizer Inc. common shareholders | | $ | 5,563 | | | $ | 3,489 | | | $ | 10,440 | | | $ | 6,843 | | Net income attributable to Pfizer Inc. common shareholders | | | $ | 7,864 | | | $ | 4,877 | |
| Earnings per common share––basic: | Earnings per common share––basic: | | | | | | | | | Earnings per common share––basic: | | | | | |
Income from continuing operations attributable to Pfizer Inc. common shareholders | Income from continuing operations attributable to Pfizer Inc. common shareholders | | $ | 0.99 | | | $ | 0.47 | | | $ | 1.86 | | | $ | 0.91 | | Income from continuing operations attributable to Pfizer Inc. common shareholders | | | $ | 1.40 | | | $ | 0.87 | |
Income from discontinued operations––net of tax | | 0 | | | 0.16 | | | 0.01 | | | 0.32 | | |
Discontinued operations––net of tax | | Discontinued operations––net of tax | | | — | | | — | |
Net income attributable to Pfizer Inc. common shareholders | Net income attributable to Pfizer Inc. common shareholders | | $ | 0.99 | | | $ | 0.63 | | | $ | 1.87 | | | $ | 1.23 | | Net income attributable to Pfizer Inc. common shareholders | | | $ | 1.40 | | | $ | 0.87 | |
| Earnings per common share––diluted: | Earnings per common share––diluted: | | | | | | | | | Earnings per common share––diluted: | | | | | |
Income from continuing operations attributable to Pfizer Inc. common shareholders | Income from continuing operations attributable to Pfizer Inc. common shareholders | | $ | 0.98 | | | $ | 0.46 | | | $ | 1.84 | | | $ | 0.90 | | Income from continuing operations attributable to Pfizer Inc. common shareholders | | | $ | 1.37 | | | $ | 0.86 | |
Income from discontinued operations––net of tax | | 0 | | | 0.16 | | | 0.01 | | | 0.32 | | |
Discontinued operations––net of tax | | Discontinued operations––net of tax | | | — | | | — | |
Net income attributable to Pfizer Inc. common shareholders | Net income attributable to Pfizer Inc. common shareholders | | $ | 0.98 | | | $ | 0.62 | | | $ | 1.84 | | | $ | 1.22 | | Net income attributable to Pfizer Inc. common shareholders | | | $ | 1.37 | | | $ | 0.86 | |
| Weighted-average shares––basic | Weighted-average shares––basic | | 5,598 | | | 5,554 | | | 5,591 | | | 5,550 | | Weighted-average shares––basic | | | 5,617 | | | 5,584 | |
Weighted-average shares––diluted | Weighted-average shares––diluted | | 5,678 | | | 5,619 | | | 5,670 | | | 5,616 | | Weighted-average shares––diluted | | | 5,758 | | | 5,662 | |
(a)Exclusive of amortization of intangible assets, except as disclosed inassets.
(b)See Note 9 in this Form 10-Q and Note 1L in our 2020 Form 10-K.1D.
See Accompanying Notes.
PFIZER INC. AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(UNAUDITED)
| | | | Three Months Ended | | Six Months Ended | | | | Three Months Ended |
(MILLIONS) | (MILLIONS) | | July 4, 2021 | | June 28, 2020 | | July 4, 2021 | | June 28, 2020 | (MILLIONS) | | | April 3, 2022 | | April 4, 2021 |
Net income before allocation to noncontrolling interests | Net income before allocation to noncontrolling interests | | $ | 5,589 | | | $ | 3,497 | | | $ | 10,475 | | | $ | 6,860 | | Net income before allocation to noncontrolling interests | | | $ | 7,870 | | | $ | 4,886 | |
| Foreign currency translation adjustments, net | Foreign currency translation adjustments, net | | 36 | | | (173) | | | 501 | | | (1,430) | | Foreign currency translation adjustments, net | | | (363) | | | 465 | |
| Unrealized holding gains/(losses) on derivative financial instruments, net | Unrealized holding gains/(losses) on derivative financial instruments, net | | (248) | | | 213 | | | (35) | | | (288) | | Unrealized holding gains/(losses) on derivative financial instruments, net | | | 203 | | | 214 | |
Reclassification adjustments for (gains)/losses included in net income(a) | Reclassification adjustments for (gains)/losses included in net income(a) | | (21) | | | (186) | | | 238 | | | (167) | | Reclassification adjustments for (gains)/losses included in net income(a) | | | (213) | | | 259 | |
| | | (270) | | | 27 | | | 203 | | | (455) | | | | | (10) | | | 473 | |
Unrealized holding gains/(losses) on available-for-sale securities, net | Unrealized holding gains/(losses) on available-for-sale securities, net | | 59 | | | 42 | | | 138 | | | (9) | | Unrealized holding gains/(losses) on available-for-sale securities, net | | | (133) | | | 79 | |
Reclassification adjustments for (gains)/losses included in net income(b) | Reclassification adjustments for (gains)/losses included in net income(b) | | 61 | | | 44 | | | (181) | | | 59 | | Reclassification adjustments for (gains)/losses included in net income(b) | | | 233 | | | (242) | |
| | | | 120 | | | 87 | | | (43) | | | 50 | | | | | 99 | | | (163) | |
| Reclassification adjustments related to amortization of prior service costs and other, net | Reclassification adjustments related to amortization of prior service costs and other, net | | (39) | | | (45) | | | (79) | | | (89) | | Reclassification adjustments related to amortization of prior service costs and other, net | | | (36) | | | (40) | |
| Reclassification adjustments related to curtailments of prior service costs and other, net | | Reclassification adjustments related to curtailments of prior service costs and other, net | | | (10) | | | — | |
Other | Other | | (1) | | | 5 | | | (5) | | | 4 | | Other | | | (1) | | | (3) | |
| | | (41) | | | (40) | | | (84) | | | (85) | | | | | (47) | | | (43) | |
Other comprehensive income/(loss), before tax | Other comprehensive income/(loss), before tax | | (155) | | | (100) | | | 577 | | | (1,920) | | Other comprehensive income/(loss), before tax | | | (321) | | | 732 | |
Tax provision/(benefit) on other comprehensive income/(loss) | Tax provision/(benefit) on other comprehensive income/(loss) | | (63) | | | 87 | | | 21 | | | (293) | | Tax provision/(benefit) on other comprehensive income/(loss) | | | (60) | | | 84 | |
Other comprehensive income/(loss) before allocation to noncontrolling interests | Other comprehensive income/(loss) before allocation to noncontrolling interests | | $ | (92) | | | $ | (187) | | | $ | 556 | | | $ | (1,628) | | Other comprehensive income/(loss) before allocation to noncontrolling interests | | | $ | (260) | | | $ | 647 | |
| Comprehensive income/(loss) before allocation to noncontrolling interests | Comprehensive income/(loss) before allocation to noncontrolling interests | | $ | 5,498 | | | $ | 3,310 | | | $ | 11,031 | | | $ | 5,233 | | Comprehensive income/(loss) before allocation to noncontrolling interests | | | $ | 7,610 | | | $ | 5,533 | |
Less: Comprehensive income/(loss) attributable to noncontrolling interests | Less: Comprehensive income/(loss) attributable to noncontrolling interests | | 28 | | | (4) | | | 38 | | | 5 | | Less: Comprehensive income/(loss) attributable to noncontrolling interests | | | 6 | | | 10 | |
Comprehensive income/(loss) attributable to Pfizer Inc. | Comprehensive income/(loss) attributable to Pfizer Inc. | | $ | 5,469 | | | $ | 3,314 | | | $ | 10,992 | | | $ | 5,228 | | Comprehensive income/(loss) attributable to Pfizer Inc. | | | $ | 7,604 | | | $ | 5,523 | |
(a)Reclassified into Other (income)/deductions—net and Cost of sales. See Note 7E.
(b)Reclassified into Other (income)/deductions—net.
See Accompanying Notes.
PFIZER INC. AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED BALANCE SHEETS
| (MILLIONS) | (MILLIONS) | | July 4, 2021 | | December 31, 2020 | (MILLIONS) | | April 3, 2022 | | December 31, 2021 |
| | | (Unaudited) | | | | | (Unaudited) | | |
Assets | Assets | | Assets | |
Cash and cash equivalents | Cash and cash equivalents | | $ | 2,372 | | | $ | 1,784 | | Cash and cash equivalents | | $ | 2,470 | | | $ | 1,944 | |
Short-term investments | Short-term investments | | 19,328 | | | 10,437 | | Short-term investments | | 21,427 | | | 29,125 | |
Trade accounts receivable, less allowance for doubtful accounts: 2021—$500; 2020—$508 | | 10,587 | | | 7,930 | | |
Trade accounts receivable, less allowance for doubtful accounts: 2022—$492; 2021—$492 | | Trade accounts receivable, less allowance for doubtful accounts: 2022—$492; 2021—$492 | | 13,225 | | | 11,479 | |
Inventories | Inventories | | 8,948 | | | 8,046 | | Inventories | | 9,979 | | | 9,059 | |
Current tax assets | Current tax assets | | 3,761 | | | 3,264 | | Current tax assets | | 3,117 | | | 4,266 | |
Other current assets | Other current assets | | 3,818 | | | 3,605 | | Other current assets | | 4,202 | | | 3,820 | |
Total current assets | Total current assets | | 48,814 | | | 35,067 | | Total current assets | | 54,420 | | | 59,693 | |
Equity-method investments | Equity-method investments | | 16,608 | | | 16,856 | | Equity-method investments | | 15,995 | | | 16,472 | |
Long-term investments | Long-term investments | | 4,334 | | | 3,406 | | Long-term investments | | 4,742 | | | 5,054 | |
Property, plant and equipment, less accumulated depreciation: 2021—$15,328; 2020—$14,812 | | 14,224 | | | 13,900 | | |
Property, plant and equipment, less accumulated depreciation: 2022—$15,358; 2021—$15,074 | | Property, plant and equipment, less accumulated depreciation: 2022—$15,358; 2021—$15,074 | | 15,109 | | | 14,882 | |
Identifiable intangible assets | Identifiable intangible assets | | 27,323 | | | 28,471 | | Identifiable intangible assets | | 29,816 | | | 25,146 | |
Goodwill | Goodwill | | 49,867 | | | 49,577 | | Goodwill | | 50,211 | | | 49,208 | |
Noncurrent deferred tax assets and other noncurrent tax assets | Noncurrent deferred tax assets and other noncurrent tax assets | | 2,694 | | | 2,383 | | Noncurrent deferred tax assets and other noncurrent tax assets | | 5,668 | | | 3,341 | |
Other noncurrent assets | Other noncurrent assets | | 6,056 | | | 4,569 | | Other noncurrent assets | | 7,879 | | | 7,679 | |
| Total assets | Total assets | | $ | 169,920 | | | $ | 154,229 | | Total assets | | $ | 183,841 | | | $ | 181,476 | |
| Liabilities and Equity | Liabilities and Equity | | | | | Liabilities and Equity | | | | |
Short-term borrowings, including current portion of long-term debt: 2021—$3,687; 2020—$2,002 | | $ | 3,888 | | | $ | 2,703 | | |
Short-term borrowings, including current portion of long-term debt: 2022—$260; 2021—$1,636 | | Short-term borrowings, including current portion of long-term debt: 2022—$260; 2021—$1,636 | | $ | 645 | | | $ | 2,241 | |
Trade accounts payable | Trade accounts payable | | 4,327 | | | 4,309 | | Trade accounts payable | | 5,506 | | | 5,578 | |
Dividends payable | Dividends payable | | 2,184 | | | 2,162 | | Dividends payable | | — | | | 2,249 | |
Income taxes payable | Income taxes payable | | 1,742 | | | 1,049 | | Income taxes payable | | 3,177 | | | 1,266 | |
Accrued compensation and related items | Accrued compensation and related items | | 2,015 | | | 3,058 | | Accrued compensation and related items | | 2,249 | | | 3,332 | |
Deferred revenues | Deferred revenues | | 4,291 | | | 1,113 | | Deferred revenues | | 3,108 | | | 3,067 | |
Other current liabilities | Other current liabilities | | 17,217 | | | 11,527 | | Other current liabilities | | 24,583 | | | 24,939 | |
| Total current liabilities | Total current liabilities | | 35,664 | | | 25,920 | | Total current liabilities | | 39,268 | | | 42,671 | |
| Long-term debt | Long-term debt | | 35,354 | | | 37,133 | | Long-term debt | | 35,656 | | | 36,195 | |
Pension benefit obligations | Pension benefit obligations | | 4,305 | | | 4,766 | | Pension benefit obligations | | 3,261 | | | 3,489 | |
Postretirement benefit obligations | Postretirement benefit obligations | | 634 | | | 645 | | Postretirement benefit obligations | | 233 | | | 235 | |
Noncurrent deferred tax liabilities | Noncurrent deferred tax liabilities | | 4,161 | | | 4,063 | | Noncurrent deferred tax liabilities | | 655 | | | 349 | |
Other taxes payable | Other taxes payable | | 11,259 | | | 11,560 | | Other taxes payable | | 11,574 | | | 11,331 | |
Other noncurrent liabilities | Other noncurrent liabilities | | 8,228 | | | 6,669 | | Other noncurrent liabilities | | 10,508 | | | 9,743 | |
Total liabilities | Total liabilities | | 99,605 | | | 90,756 | | Total liabilities | | 101,155 | | | 104,013 | |
| Commitments and Contingencies | Commitments and Contingencies | | 0 | | 0 | Commitments and Contingencies | | 0 | | 0 |
| | Common stock | Common stock | | 472 | | | 470 | | Common stock | | 476 | | | 473 | |
Additional paid-in capital | Additional paid-in capital | | 89,336 | | | 88,674 | | Additional paid-in capital | | 90,844 | | | 90,591 | |
| Treasury stock | Treasury stock | | (111,356) | | | (110,988) | | Treasury stock | | (113,931) | | | (111,361) | |
Retained earnings | Retained earnings | | 96,346 | | | 90,392 | | Retained earnings | | 111,193 | | | 103,394 | |
Accumulated other comprehensive loss | Accumulated other comprehensive loss | | (4,758) | | | (5,310) | | Accumulated other comprehensive loss | | (6,157) | | | (5,897) | |
Total Pfizer Inc. shareholders’ equity | Total Pfizer Inc. shareholders’ equity | | 70,042 | | | 63,238 | | Total Pfizer Inc. shareholders’ equity | | 82,424 | | | 77,201 | |
Equity attributable to noncontrolling interests | Equity attributable to noncontrolling interests | | 273 | | | 235 | | Equity attributable to noncontrolling interests | | 261 | | | 262 | |
Total equity | Total equity | | 70,315 | | | 63,473 | | Total equity | | 82,685 | | | 77,462 | |
Total liabilities and equity | Total liabilities and equity | | $ | 169,920 | | | $ | 154,229 | | Total liabilities and equity | | $ | 183,841 | | | $ | 181,476 | |
See Accompanying Notes.
PFIZER INC. AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
(UNAUDITED)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | PFIZER INC. SHAREHOLDERS | | | | |
| | Preferred Stock | | Common Stock | | | | Treasury Stock | | | | | | | | | | |
(MILLIONS, EXCEPT PREFERRED SHARES) | | Shares | | Stated Value | | Shares | | Par Value | | Add’l Paid-In Capital | | Shares | | Cost | | Retained Earnings | | Accum. Other Comp. Loss | | Share- holders’ Equity | | Non-controlling interests | | Total Equity |
Balance, April 4, 2021 | | 0 | | | $ | 0 | | | 9,445 | | | $ | 472 | | | $ | 89,002 | | | (3,851) | | | $ | (111,349) | | | $ | 95,158 | | | $ | (4,664) | | | $ | 68,620 | | | $ | 245 | | | $ | 68,865 | |
Net income | | | | | | | | | | | | | | | | 5,563 | | | | | 5,563 | | | 26 | | | 5,589 | |
Other comprehensive income/(loss), net of tax | | | | | | | | | | | | | | | | | | (94) | | | (94) | | | 2 | | | (92) | |
Cash dividends declared, per share: $0.78 | | | | | | | | | | | | | | | | | | | | | | | | |
Common stock | | | | | | | | | | | | | | | | (4,293) | | | | | (4,293) | | | | | (4,293) | |
Preferred stock | | | | | | | | | | | | | | | | | | | | — | | | | | 0 | |
Noncontrolling interests | | | | | | | | | | | | | | | | | | | | — | | | — | | | 0 | |
Share-based payment transactions | | | | | | 5 | | | — | | | 334 | | | — | | | (7) | | | (76) | | | | | 251 | | | | | 251 | |
Purchases of common stock | | | | | | | | | | | | — | | | — | | | | | | | — | | | | | 0 | |
Preferred stock conversions and redemptions | | — | | | — | | | | | | | — | | | — | | | — | | | | | | | — | | | | | 0 | |
Other | | | | | | | | | | — | | | — | | | — | | | (7) | | | | | (6) | | | — | | | (6) | |
Balance, July 4, 2021 | | 0 | | | $ | 0 | | | 9,450 | | | $ | 472 | | | $ | 89,336 | | | (3,851) | | | $ | (111,356) | | | $ | 96,346 | | | $ | (4,758) | | | $ | 70,042 | | | $ | 273 | | | $ | 70,315 | |
|
| | PFIZER INC. SHAREHOLDERS | | | | |
| | Preferred Stock | | Common Stock | | | | Treasury Stock | | | | | | | | | | |
(MILLIONS, EXCEPT PREFERRED SHARES) | | Shares | | Stated Value | | Shares | | Par Value | | Add’l Paid-In Capital | | Shares | | Cost | | Retained Earnings | | Accum. Other Comp. Loss | | Share- holders’ Equity | | Non-controlling interests | | Total Equity |
Balance, March 29, 2020 | | 417 | | | $ | 17 | | | 9,393 | | | $ | 470 | | | $ | 87,680 | | | (3,841) | | | $ | (111,010) | | | $ | 94,680 | | | $ | (6,808) | | | $ | 65,028 | | | $ | 312 | | | $ | 65,341 | |
Net income | | | | | | | | | | | | | | | | 3,489 | | | | | 3,489 | | | 8 | | | 3,497 | |
Other comprehensive income/(loss), net of tax | | | | | | | | | | | | | | | | | | (174) | | | (174) | | | (12) | | | (187) | |
Cash dividends declared, per share: $0.76 | | | | | | | | | | | | | | | | | | | | | | | | |
Common stock | | | | | | | | | | | | | | | | (4,223) | | | | | (4,223) | | | | | (4,223) | |
Preferred stock | | | | | | | | | | | | | | | | — | | | | | — | | | | | 0 | |
Noncontrolling interests | | | | | | | | | | | | | | | | | | | | — | | | (80) | | | (80) | |
Share-based payment transactions | | | | | | 2 | | | — | | | 221 | | | — | | | 1 | | | | | | | 222 | | | | | 222 | |
Purchases of common stock | | | | | | | | | | | | — | | | — | | | | | | | — | | | | | 0 | |
Preferred stock conversions and redemptions | | (417) | | | (17) | | | | | | | (14) | | | 1 | | | 31 | | | | | | | — | | | | | 0 | |
Other | | | | | | | | | | — | | | — | | | — | | | — | | | | | — | | | — | | | 0 | |
Balance, June 28, 2020 | | 0 | | | $ | 0 | | | 9,394 | | | $ | 470 | | | $ | 87,886 | | | (3,840) | | | $ | (110,978) | | | $ | 93,946 | | | $ | (6,983) | | | $ | 64,342 | | | $ | 228 | | | $ | 64,570 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | PFIZER INC. SHAREHOLDERS | | | | |
| | | | Common Stock | | | | Treasury Stock | | | | | | | | | | |
(MILLIONS, EXCEPT PER COMMON SHARE DATA) | | | | | | Shares | | Par Value | | Add’l Paid-In Capital | | Shares | | Cost | | Retained Earnings | | Accum. Other Comp. Loss | | Share- holders’ Equity | | Non-controlling interests | | Total Equity |
Balance, January 1, 2022 | | | | | | 9,471 | | | $ | 473 | | | $ | 90,591 | | | (3,851) | | | $ | (111,361) | | | $ | 103,394 | | | $ | (5,897) | | | $ | 77,201 | | | $ | 262 | | | $ | 77,462 | |
Net income | | | | | | | | | | | | | | | | 7,864 | | | | | 7,864 | | | 6 | | | 7,870 | |
Other comprehensive income/(loss), net of tax | | | | | | | | | | | | | | | | | | (260) | | | (260) | | | — | | | (260) | |
Cash dividends declared, per share: $— | | | | | | | | | | | | | | | | | | | | | | | | |
Common stock | | | | | | | | | | | | | | | | — | | | | | — | | | | | — | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Share-based payment transactions | | | | | | 23 | | | 2 | | | 249 | | | (12) | | | (570) | | | (65) | | | | | (383) | | | | | (383) | |
Purchases of common stock | | | | | | | | | | | | (39) | | | (2,000) | | | | | | | (2,000) | | | | | (2,000) | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Other | | | | | | | | | | 3 | | | — | | | — | | | — | | | | | 3 | | | (7) | | | (4) | |
Balance, April 3, 2022 | | | | | | 9,494 | | | $ | 476 | | | $ | 90,844 | | | (3,903) | | | $ | (113,931) | | | $ | 111,193 | | | $ | (6,157) | | | $ | 82,424 | | | $ | 261 | | | $ | 82,685 | |
|
| | | | | | PFIZER INC. SHAREHOLDERS | | | | |
| | | | Common Stock | | | | Treasury Stock | | | | | | | | | | |
(MILLIONS, EXCEPT PER COMMON SHARE DATA) | | | | | | Shares | | Par Value | | Add’l Paid-In Capital | | Shares | | Cost | | Retained Earnings | | Accum. Other Comp. Loss | | Share- holders’ Equity | | Non-controlling interests | | Total Equity |
Balance, January 1, 2021 | | | | | | 9,407 | | | $ | 470 | | | $ | 88,674 | | | (3,840) | | | $ | (110,988) | | | $ | 90,392 | | | $ | (5,310) | | | $ | 63,238 | | | $ | 235 | | | $ | 63,473 | |
Net income | | | | | | | | | | | | | | | | 4,877 | | | | | 4,877 | | | 9 | | | 4,886 | |
Other comprehensive income/(loss), net of tax | | | | | | | | | | | | | | | | | | 646 | | | 646 | | | 1 | | | 647 | |
Cash dividends declared, per share: $— | | | | | | | | | | | | | | | | | | | | | | | | |
Common stock | | | | | | | | | | | | | | | | (84) | | | | | (84) | | | | | (84) | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Share-based payment transactions | | | | | | 38 | | | 2 | | | 329 | | | (11) | | | (361) | | | | | | | (30) | | | | | (30) | |
Purchases of common stock | | | | | | | | | | | | — | | | — | | | | | | | — | | | | | — | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Other | | | | | | | | | | — | | | — | | | — | | | (27) | | | | | (27) | | | — | | | (27) | |
Balance, April 4, 2021 | | | | | | 9,445 | | | $ | 472 | | | $ | 89,002 | | | (3,851) | | | $ | (111,349) | | | $ | 95,158 | | | $ | (4,664) | | | $ | 68,620 | | | $ | 245 | | | $ | 68,865 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
See Accompanying Notes.
PFIZER INC. AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
(UNAUDITED)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | PFIZER INC. SHAREHOLDERS | | | | |
| | Preferred Stock | | Common Stock | | | | Treasury Stock | | | | | | | | | | |
(MILLIONS, EXCEPT PREFERRED SHARES) | | Shares | | Stated Value | | Shares | | Par Value | | Add’l Paid-In Capital | | Shares | | Cost | | Retained Earnings | | Accum. Other Comp. Loss | | Share- holders’ Equity | | Non-controlling interests | | Total Equity |
Balance, January 1, 2021 | | 0 | | | $ | 0 | | | 9,407 | | | $ | 470 | | | $ | 88,674 | | | (3,840) | | | $ | (110,988) | | | $ | 90,392 | | | $ | (5,310) | | | $ | 63,238 | | | $ | 235 | | | $ | 63,473 | |
Net income | | | | | | | | | | | | | | | | 10,440 | | | | | 10,440 | | | 35 | | | 10,475 | |
Other comprehensive income/(loss), net of tax | | | | | | | | | | | | | | | | | | 552 | | | 552 | | | 3 | | | 556 | |
Cash dividends declared, per share: $0.78 | | | | | | | | | | | | | | | | | | | | | | | | |
Common stock | | | | | | | | | | | | | | | | (4,377) | | | | | (4,377) | | | | | (4,377) | |
Preferred stock | | | | | | | | | | | | | | | | | | | | — | | | | | 0 | |
Noncontrolling interests | | | | | | | | | | | | | | | | | | | | — | | | — | | | 0 | |
Share-based payment transactions | | | | | | 43 | | | 2 | | | 662 | | | (11) | | | (368) | | | (76) | | | | | 221 | | | | | 221 | |
Purchases of common stock | | | | | | | | | | | | — | | | — | | | | | | | — | | | | | 0 | |
Preferred stock conversions and redemptions | | — | | | — | | | | | | | — | | | — | | | — | | | | | | | — | | | | | 0 | |
Other | | | | | | | | | | — | | | — | | | — | | | (33) | | | | | (33) | | | — | | | (33) | |
Balance, July 4, 2021 | | 0 | | | $ | 0 | | | 9,450 | | | $ | 472 | | | $ | 89,336 | | | (3,851) | | | $ | (111,356) | | | $ | 96,346 | | | $ | (4,758) | | | $ | 70,042 | | | $ | 273 | | | $ | 70,315 | |
|
| | PFIZER INC. SHAREHOLDERS | | | | |
| | Preferred Stock | | Common Stock | | | | Treasury Stock | | | | | | | | | | |
(MILLIONS, EXCEPT PREFERRED SHARES) | | Shares | | Stated Value | | Shares | | Par Value | | Add’l Paid-In Capital | | Shares | | Cost | | Retained Earnings | | Accum. Other Comp. Loss | | Share- holders’ Equity | | Non-controlling interests | | Total Equity |
Balance, January 1, 2020 | | 431 | | | $ | 17 | | | 9,369 | | | $ | 468 | | | $ | 87,428 | | | (3,835) | | | $ | (110,801) | | | $ | 91,397 | | | $ | (5,367) | | | $ | 63,143 | | | $ | 303 | | | $ | 63,447 | |
Net income | | | | | | | | | | | | | | | | 6,843 | | | | | 6,843 | | | 17 | | | 6,860 | |
Other comprehensive income/(loss), net of tax | | | | | | | | | | | | | | | | | | (1,616) | | | (1,616) | | | (12) | | | (1,628) | |
Cash dividends declared, per share: $0.76 | | | | | | | | | | | | | | | | | | | | | | | | |
Common stock | | | | | | | | | | | | | | | | (4,294) | | | | | (4,294) | | | | | (4,294) | |
Preferred stock | | | | | | | | | | | | | | | | — | | | | | — | | | | | 0 | |
Noncontrolling interests | | | | | | | | | | | | | | | | | | | | — | | | (80) | | | (80) | |
Share-based payment transactions | | | | | | 25 | | | 1 | | | 473 | | | (6) | | | (208) | | | | | | | 266 | | | | | 266 | |
Purchases of common stock | | | | | | | | | | | | — | | | — | | | | | | | — | | | | | 0 | |
Preferred stock conversions and redemptions | | (431) | | | (17) | | | | | | | (15) | | | 1 | | | 31 | | | | | | | (1) | | | | | (1) | |
Other | | | | | | | | | | — | | | — | | | — | | | — | | | | | — | | | — | | | 0 | |
Balance, June 28, 2020 | | 0 | | | $ | 0 | | | 9,394 | | | $ | 470 | | | $ | 87,886 | | | (3,840) | | | $ | (110,978) | | | $ | 93,946 | | | $ | (6,983) | | | $ | 64,342 | | | $ | 228 | | | $ | 64,570 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
See Accompanying Notes.
PFIZER INC. AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
| | | | Six Months Ended | | | Three Months Ended |
(MILLIONS) | (MILLIONS) | | July 4, 2021 | | June 28, 2020 | (MILLIONS) | | April 3, 2022 | | April 4, 2021 |
Operating Activities | Operating Activities | | | | | Operating Activities | | | | |
Net income before allocation to noncontrolling interests | Net income before allocation to noncontrolling interests | | $ | 10,475 | | | $ | 6,860 | | Net income before allocation to noncontrolling interests | | $ | 7,870 | | | $ | 4,886 | |
Income from discontinued operations—net of tax | | 32 | | | 1,774 | | |
Discontinued operations—net of tax | | Discontinued operations—net of tax | | (9) | | | 1 | |
Net income from continuing operations before allocation to noncontrolling interests | Net income from continuing operations before allocation to noncontrolling interests | | 10,443 | | | 5,087 | | Net income from continuing operations before allocation to noncontrolling interests | | 7,879 | | | 4,885 | |
Adjustments to reconcile net income before allocation to noncontrolling interests to net cash provided by operating activities: | Adjustments to reconcile net income before allocation to noncontrolling interests to net cash provided by operating activities: | | | | | Adjustments to reconcile net income before allocation to noncontrolling interests to net cash provided by operating activities: | | | | |
Depreciation and amortization | Depreciation and amortization | | 2,554 | | | 2,365 | | Depreciation and amortization | | 1,187 | | | 1,207 | |
Asset write-offs and impairments | Asset write-offs and impairments | | 77 | | | 58 | | Asset write-offs and impairments | | 31 | | | 24 | |
Gain on completion of Consumer Healthcare JV transaction, net of cash conveyed | | 0 | | | (6) | | |
| Deferred taxes from continuing operations | Deferred taxes from continuing operations | | 47 | | | 33 | | Deferred taxes from continuing operations | | (2,321) | | | 203 | |
| Share-based compensation expense | Share-based compensation expense | | 394 | | | 244 | | Share-based compensation expense | | 86 | | | 172 | |
Benefit plan contributions in excess of expense/income | Benefit plan contributions in excess of expense/income | | (779) | | | (526) | | Benefit plan contributions in excess of expense/income | | (404) | | | (373) | |
Other adjustments, net | Other adjustments, net | | (1,305) | | | (370) | | Other adjustments, net | | 815 | | | (291) | |
Other changes in assets and liabilities, net of acquisitions and divestitures | Other changes in assets and liabilities, net of acquisitions and divestitures | | 4,398 | | | (2,056) | | Other changes in assets and liabilities, net of acquisitions and divestitures | | (730) | | | (1,281) | |
Net cash provided by operating activities from continuing operations | Net cash provided by operating activities from continuing operations | | 15,828 | | | 4,829 | | Net cash provided by operating activities from continuing operations | | 6,541 | | | 4,546 | |
Net cash provided by operating activities from discontinued operations | | 9 | | | 1,860 | | |
Net cash provided by/(used in) operating activities from discontinued operations | | Net cash provided by/(used in) operating activities from discontinued operations | | — | | | (8) | |
Net cash provided by operating activities | Net cash provided by operating activities | | 15,837 | | | 6,688 | | Net cash provided by operating activities | | 6,541 | | | 4,538 | |
| Investing Activities | Investing Activities | | | | | Investing Activities | | | | |
Purchases of property, plant and equipment | Purchases of property, plant and equipment | | (1,094) | | | (906) | | Purchases of property, plant and equipment | | (643) | | | (554) | |
Purchases of short-term investments | Purchases of short-term investments | | (15,982) | | | (5,141) | | Purchases of short-term investments | | (8,758) | | | (6,054) | |
Proceeds from redemptions/sales of short-term investments | Proceeds from redemptions/sales of short-term investments | | 7,572 | | | 4,595 | | Proceeds from redemptions/sales of short-term investments | | 13,421 | | | 5,465 | |
Net (purchases of)/proceeds from redemptions/sales of short-term investments with original maturities of three months or less | Net (purchases of)/proceeds from redemptions/sales of short-term investments with original maturities of three months or less | | (505) | | | (537) | | Net (purchases of)/proceeds from redemptions/sales of short-term investments with original maturities of three months or less | | 3,409 | | | (996) | |
Purchases of long-term investments | Purchases of long-term investments | | (100) | | | (168) | | Purchases of long-term investments | | (676) | | | (27) | |
Proceeds from redemptions/sales of long-term investments | Proceeds from redemptions/sales of long-term investments | | 297 | | | 536 | | Proceeds from redemptions/sales of long-term investments | | 52 | | | 256 | |
| Acquisition of business, net of cash acquired | | Acquisition of business, net of cash acquired | | (6,225) | | | — | |
Other investing activities, net | Other investing activities, net | | (72) | | | (9) | | Other investing activities, net | | (13) | | | 163 | |
Net cash provided by/(used in) investing activities from continuing operations | Net cash provided by/(used in) investing activities from continuing operations | | (9,884) | | | (1,630) | | Net cash provided by/(used in) investing activities from continuing operations | | 567 | | | (1,746) | |
Net cash provided by/(used in) investing activities from discontinued operations | Net cash provided by/(used in) investing activities from discontinued operations | | 0 | | | (11,452) | | Net cash provided by/(used in) investing activities from discontinued operations | | — | | | — | |
Net cash provided by/(used in) investing activities | Net cash provided by/(used in) investing activities | | (9,884) | | | (13,082) | | Net cash provided by/(used in) investing activities | | 567 | | | (1,747) | |
| Financing Activities | Financing Activities | | | | | Financing Activities | | | | |
Proceeds from short-term borrowings | | 0 | | | 12,352 | | |
Principal payments on short-term borrowings | | 0 | | | (13,166) | | |
| Net (payments on)/proceeds from short-term borrowings with original maturities of three months or less | Net (payments on)/proceeds from short-term borrowings with original maturities of three months or less | | (499) | | | (2,314) | | Net (payments on)/proceeds from short-term borrowings with original maturities of three months or less | | (220) | | | (25) | |
Proceeds from issuance of long-term debt | | 0 | | | 5,194 | | |
| Principal payments on long-term debt | Principal payments on long-term debt | | 0 | | | (2,181) | | Principal payments on long-term debt | | (1,609) | | | — | |
| Purchases of common stock | | Purchases of common stock | | (2,000) | | | — | |
Cash dividends paid | Cash dividends paid | | (4,355) | | | (4,216) | | Cash dividends paid | | (2,249) | | | (2,172) | |
Other financing activities, net | Other financing activities, net | | (509) | | | (163) | | Other financing activities, net | | (501) | | | (610) | |
Net cash provided by/(used in) financing activities from continuing operations | | (5,364) | | | (4,493) | | |
Net cash provided by/(used in) financing activities from discontinued operations | | 0 | | | 11,452 | | |
| Net cash provided by/(used in) financing activities | Net cash provided by/(used in) financing activities | | (5,364) | | | 6,959 | | Net cash provided by/(used in) financing activities | | (6,578) | | | (2,807) | |
Effect of exchange-rate changes on cash and cash equivalents and restricted cash and cash equivalents | Effect of exchange-rate changes on cash and cash equivalents and restricted cash and cash equivalents | | 5 | | | (70) | | Effect of exchange-rate changes on cash and cash equivalents and restricted cash and cash equivalents | | (1) | | | — | |
Net increase/(decrease) in cash and cash equivalents and restricted cash and cash equivalents | Net increase/(decrease) in cash and cash equivalents and restricted cash and cash equivalents | | 593 | | | 495 | | Net increase/(decrease) in cash and cash equivalents and restricted cash and cash equivalents | | 529 | | | (15) | |
Cash and cash equivalents and restricted cash and cash equivalents, at beginning of period | Cash and cash equivalents and restricted cash and cash equivalents, at beginning of period | | 1,825 | | | 1,350 | | Cash and cash equivalents and restricted cash and cash equivalents, at beginning of period | | 1,983 | | | 1,825 | |
Cash and cash equivalents and restricted cash and cash equivalents, at end of period | Cash and cash equivalents and restricted cash and cash equivalents, at end of period | | $ | 2,418 | | | $ | 1,845 | | Cash and cash equivalents and restricted cash and cash equivalents, at end of period | | $ | 2,513 | | | $ | 1,809 | |
Supplemental Cash Flow Information | Supplemental Cash Flow Information | | | | | Supplemental Cash Flow Information | | | | |
| Cash paid/(received) during the period for: | | | | | |
Cash paid during the period for: | | Cash paid during the period for: | | | | |
Income taxes | Income taxes | | $ | 2,188 | | | $ | 1,290 | | Income taxes | | $ | 354 | | | $ | 394 | |
Interest paid | Interest paid | | 798 | | | 910 | | Interest paid | | 453 | | | 445 | |
Interest rate hedges | Interest rate hedges | | (67) | | | (66) | | Interest rate hedges | | 26 | | | 10 | |
| Non-cash transaction: | | |
Right-of-use assets obtained in exchange for lease liabilities | | $ | 1,204 | | | $ | 74 | | |
|
See Accompanying Notes.
PFIZER INC. AND SUBSIDIARY COMPANIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Note 1. Basis of Presentation and Significant Accounting Policies
A. Basis of Presentation
We prepared these condensed consolidated financial statements in conformity with U.S. GAAP, consistent in all material respects with those applied in our 20202021 Form 10-K, except as disclosed in Note 1C.10-K. As permitted under the SEC requirements for interim reporting, certain footnotes or other financial information have been condensed or omitted.
These financial statements include all normal and recurring adjustments that are considered necessary for the fair statement of results for the interim periods presented. The information included in this Form 10-Q should be read in conjunction with the consolidated financial statements and accompanying notes included in our 20202021 Form 10-K. Revenues, expenses, assets and liabilities can vary during each quarter of the year. Therefore, the results and trends in these interim financial statements may not be representative of those for the full year.
Pfizer’s fiscal quarter-end for subsidiaries operating outside the U.S. is as of and for the three and six months ended May 30,February 27, 2022 and February 28, 2021, and May 24, 2020, and for U.S. subsidiaries is as of and for the three and six months ended JulyApril 3, 2022 and April 4, 2021.
At the beginning of our fiscal fourth quarter of 2021, we reorganized our commercial operations and June 28, 2020.began to manage our commercial operations through a new global structure consisting of 2 operating segments, each led by a single manager: Biopharma, our innovative science-based biopharmaceutical business, and PC1, our global contract development and manufacturing organization and a leading supplier of specialty active pharmaceutical ingredients. Biopharma is the only reportable segment. See Note 17A in our 2021 Form 10-K and Note 13 below.
Business development activities completed in 2022 and 2021 impacted financial results in the periods presented. Discontinued operations in the periods presented relate to the previously divested Meridian subsidiary, Mylan-Japan collaboration and Upjohn Business. See NoteNotes 1A and 2B in our 20202021 Form 10-K, and Note 2. On November 16, 2020, we completed the spin-off and the combination of our Upjohn Business with Mylan to form Viatris. For additional information, see Note 2B in our 2020 Form 10-K. On December 21, 2020, which fell in Pfizer’s international first quarter of 2021, Pfizerbelow.
We have made certain reclassification adjustments to conform prior-period amounts to the current presentation for discontinued operations and Viatris completed the termination of the Mylan-Japan collaboration pursuant to an agreement dated November 13, 2020 and we transferred related inventories and operations that were part of the Mylan-Japan collaboration to Viatris. As a result, the financial position and results of operations of the Upjohn Business and the Mylan-Japan collaboration are presented as discontinued operations. Prior-period information has been restated to reflect our current organization structure.segment reporting.
B. New Accounting Standard Adopted in 20212022
On January 1, 2021,2022, we early adopted a new accounting standard for income tax that eliminates certain exceptionscontract assets and contract liabilities acquired in a business combination. Under the new standard, acquired contract assets and contract liabilities are required to be recognized and measured by the guidance related toacquirer on the approach for intraperiod tax allocation, the methodology for calculating income taxesacquisition date in an interim period and the recognition of deferred tax liabilities for outside basis differences. Theaccordance with ASC 606. This new guidance also simplifies aspectsgenerally results in the acquirer recognizing contract assets and contract liabilities at the same amounts that were recorded by the acquiree. Previously, these amounts were recognized by the acquirer at fair value as of the accounting for franchise taxesacquisition date. We adopted this new standard on a prospective basis and enacted changes in tax laws or rates and clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill. The adoption of this guidance did not have a materialthere was no impact onto our condensed consolidated financial statements.
For information on new accounting standards adopted in 2020, see Note 1B in our 2020 Form 10-K.
C. Change in Accounting Principle
In the first quarter of 2021, we adopted a change in accounting principle to a more preferable policy under U.S. GAAP to immediately recognize actuarial gains and losses arising from the remeasurement of our pension and postretirement plans (MTM Accounting).Under the prior policy, we deferred recognition of these gains and losses in Accumulated other comprehensive loss. The accumulated actuarial gains/losses outside of a “corridor” were then amortized into net periodic benefit costs over the average remaining service period or the average life expectancy of participants. This change has been applied to all pension and postretirement plans on a retrospective basis for all prior periods presented, and as of January 1, 2020, resulted in a cumulative effect decrease to Retained earnings of $6.3 billion, with a corresponding offset to Accumulated other comprehensive loss. Each time a pension or postretirement plan is remeasured, the actuarial gain or loss is recognized immediately and classified as Other (income)/deductions––net.
We believe that MTM Accounting is a more preferable policy as it provides improved transparency of results and performance, better alignment with fair value accounting principles and a better reflection of current economic and interest rate trends on plan investments and assumptions and the actuarial impact of plan remeasurements.
PFIZER INC. AND SUBSIDIARY COMPANIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | |
The impacts of the adjustments on our condensed consolidated financial statements are summarized as follows: |
| | Three Months Ended |
| | July 4, 2021 | | June 28, 2020 |
(MILLIONS, EXCEPT PER COMMON SHARE DATA) | | Previous Accounting Principle | | Impact of Change | | As Reported | | Previous Accounting Principle | | Impact of Change | | As Adjusted |
Condensed Consolidated Statements of Income: | | | | | | | | | | | | |
Other (income)/deductions––net | | $ | (916) | | | $ | (82) | | | $ | (998) | | | $ | (873) | | | $ | (82) | | | $ | (955) | |
Income from continuing operations before provision for taxes on income | | 6,527 | | | 82 | | | 6,609 | | | 2,944 | | | 82 | | | 3,026 | |
Provision for taxes on income | | 1,025 | | | 18 | | | 1,043 | | | 396 | | | 26 | | | 422 | |
Income from discontinued operations––net of tax | | 24 | | | 0 | | | 24 | | | 887 | | | 6 | | | 893 | |
Net income before allocation to noncontrolling interests | | 5,526 | | | 63 | | | 5,589 | | | 3,434 | | | 62 | | | 3,497 | |
Net income attributable to Pfizer Inc. common shareholders | | 5,500 | | | 63 | | | 5,563 | | | 3,426 | | | 62 | | | 3,489 | |
Earnings per common share––basic: | | | | | | | | | | | | |
Income from continuing operations attributable to Pfizer Inc. common shareholders | | $ | 0.98 | | | $ | 0.01 | | | $ | 0.99 | | | $ | 0.46 | | | $ | 0.01 | | | $ | 0.47 | |
Income from discontinued operations––net of tax | | 0 | | | 0 | | | 0 | | | 0.16 | | | 0 | | | 0.16 | |
Net income attributable to Pfizer Inc. common shareholders | | 0.98 | | | 0.01 | | | 0.99 | | | 0.62 | | | 0.01 | | | 0.63 | |
Earnings per common share––diluted: | | | | | | | | | | | | |
Income from continuing operations attributable to Pfizer Inc. common shareholders | | $ | 0.97 | | | $ | 0.01 | | | $ | 0.98 | | | $ | 0.45 | | | $ | 0.01 | | | $ | 0.46 | |
Income from discontinued operations––net of tax | | 0 | | | 0 | | | 0 | | | 0.16 | | | 0 | | | 0.16 | |
Net income attributable to Pfizer Inc. common shareholders | | 0.97 | | | 0.01 | | | 0.98 | | | 0.61 | | | 0.01 | | | 0.62 | |
Condensed Consolidated Statements of Comprehensive Income: | | | | | | | | | | | | |
Foreign currency translation adjustments, net | | $ | 61 | | | $ | (25) | | | $ | 36 | | | $ | (242) | | | $ | 68 | | | $ | (173) | |
Benefit plans: actuarial gains/(losses), net | | (2) | | | 2 | | | 0 | | | 5 | | | (5) | | | 0 | |
Reclassification adjustments related to amortization | | 74 | | | (74) | | | 0 | | | 67 | | | (67) | | | 0 | |
Reclassification adjustments related to settlements, net | | 3 | | | (3) | | | 0 | | | 13 | | | (13) | | | 0 | |
Other | | (25) | | | 25 | | | 0 | | | 68 | | | (68) | | | 0 | |
Tax provision/(benefit) on other comprehensive income/(loss) | | (4) | | | (59) | | | (63) | | | 113 | | | (26) | | | 87 | |
| | | | | | |
| | | | | | | | | | | | |
|
| | Six Months Ended |
| | July 4, 2021 | | June 28, 2020 |
(MILLIONS, EXCEPT PER COMMON SHARE DATA) | | Previous Accounting Principle | | Impact of Change | | As Reported | | Previous Accounting Principle | | Impact of Change | | As Adjusted |
Condensed Consolidated Statements of Income: | | | | | | | | | | | | |
Other (income)/deductions––net | | $ | (1,773) | | | $ | (228) | | | $ | (2,001) | | | $ | (657) | | | $ | (107) | | | $ | (764) | |
Income from continuing operations before provision for taxes on income | | 12,063 | | | 228 | | | 12,291 | | | 5,761 | | | 107 | | | 5,868 | |
Provision for taxes on income | | 1,798 | | | 51 | | | 1,849 | | | 751 | | | 30 | | | 782 | |
Income from discontinued operations––net of tax | | 32 | | | 0 | | | 32 | | | 1,835 | | | (61) | | | 1,774 | |
Net income before allocation to noncontrolling interests | | 10,298 | | | 177 | | | 10,475 | | | 6,845 | | | 16 | | | 6,860 | |
Net income attributable to Pfizer Inc. common shareholders | | 10,263 | | | 177 | | | 10,440 | | | 6,828 | | | 16 | | | 6,843 | |
Earnings per common share––basic: | | | | | | | | | | | | |
Income from continuing operations attributable to Pfizer Inc. common shareholders | | $ | 1.83 | | | $ | 0.03 | | | $ | 1.86 | | | $ | 0.90 | | | $ | 0.01 | | | $ | 0.91 | |
Income from discontinued operations––net of tax | | 0.01 | | | 0 | | | 0.01 | | | 0.33 | | | (0.01) | | | 0.32 | |
Net income attributable to Pfizer Inc. common shareholders | | 1.84 | | | 0.03 | | | 1.87 | | | 1.23 | | | 0 | | | 1.23 | |
Earnings per common share––diluted: | | | | | | | | | | | | |
Income from continuing operations attributable to Pfizer Inc. common shareholders | | $ | 1.81 | | | $ | 0.03 | | | $ | 1.84 | | | $ | 0.89 | | | $ | 0.01 | | | $ | 0.90 | |
Income from discontinued operations––net of tax | | 0.01 | | | 0 | | | 0.01 | | | 0.33 | | | (0.01) | | | 0.32 | |
Net income attributable to Pfizer Inc. common shareholders | | 1.81 | | | 0.03 | | | 1.84 | | | 1.22 | | | 0 | | | 1.22 | |
|
PFIZER INC. AND SUBSIDIARY COMPANIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | |
| | Six Months Ended |
| | July 4, 2021 | | June 28, 2020 |
(MILLIONS) | | Previous Accounting Principle | | Impact of Change | | As Reported | | Previous Accounting Principle | | Impact of Change | | As Adjusted |
Condensed Consolidated Statements of Comprehensive Income: | | | | | | | | | | | | |
Foreign currency translation adjustments, net | | $ | 607 | | | $ | (106) | | | $ | 501 | | | $ | (1,513) | | | $ | 84 | | | $ | (1,430) | |
Benefit plans: actuarial gains/(losses), net | | 45 | | | (45) | | | 0 | | | (160) | | | 160 | | | 0 | |
Reclassification adjustments related to amortization | | 148 | | | (148) | | | 0 | | | 133 | | | (133) | | | 0 | |
Reclassification adjustments related to settlements, net | | 23 | | | (23) | | | 0 | | | 66 | | | (66) | | | 0 | |
Other | | (106) | | | 106 | | | 0 | | | 84 | | | (84) | | | 0 | |
Tax provision/(benefit) on other comprehensive income/(loss) | | 69 | | | (47) | | | 21 | | | (265) | | | (28) | | | (293) | |
Condensed Consolidated Statements of Cash Flows: | | | | | | | | | | | | |
Deferred taxes from continuing operations | | $ | (4) | | | $ | 51 | | | $ | 47 | | | $ | 3 | | | $ | 30 | | | $ | 33 | |
Benefit plan contributions in excess of expense/income | | (551) | | | (228) | | | (779) | | | (419) | | | (107) | | | (526) | |
| | | | | | | | | | | | |
| | July 4, 2021 | | December 31, 2020 |
(MILLIONS) | | Previous Accounting Principle | | Impact of Change | | As Reported | | Previous Accounting Principle | | Impact of Change | | As Adjusted |
Condensed Consolidated Balance Sheets: | | | | | | | | | | | | |
Noncurrent deferred tax assets and other noncurrent tax assets | | $ | 2,697 | | | $ | (3) | | | $ | 2,694 | | | $ | 2,383 | | | $ | 0 | | | $ | 2,383 | |
Other noncurrent assets | | 6,044 | | | 12 | | | 6,056 | | | 4,569 | | | 0 | | | 4,569 | |
Pension benefit obligations | | 4,305 | | | (1) | | | 4,305 | | | 4,766 | | | 0 | | | 4,766 | |
Retained earnings | | 96,169 | | | 177 | | | 96,346 | | | 96,770 | | | (6,378) | | | 90,392 | |
Accumulated other comprehensive loss | | (4,589) | | | (168) | | | (4,758) | | | (11,688) | | | 6,378 | | | (5,310) | |
| | | | | | | | | | | | |
D. Revenues and Trade Accounts Receivable
Revenue Recognition––We record revenues from product sales when there is a transfer of control of the product from us to the customer. We typically determine transfer of control based on when the product is shipped or delivered and title passes to the customer. For certain contracts, the finished product may temporarily be stored at our location under a bill-and-hold arrangement. Revenue is recognized on bill-and-hold arrangements at the point in time when the customer obtains control of the product and all of the following criteria have been met: the arrangement is substantive; the product is identified separately as belonging to the customer; the product is ready for physical transfer to the customer; and we do not have the ability to use the product or direct it to another customer. In determining when the customer obtains control of the product, we consider certain indicators, including whether we have a present right to payment from the customer, whether title and/or significant risks and rewards of ownership have transferred to the customer and whether customer acceptance has been received.
Customers––Our prescription pharmaceutical products, with the exception of Paxlovid, are sold principally to wholesalers, but we also sell directly to retailers, hospitals, clinics, government agencies and pharmacies. We principally sell Paxlovid to government agencies. In the U.S., we primarily sell our vaccine products directly to the federal government, CDC, wholesalers, individual provider offices, retail pharmacies and integrated delivery networks. Outside the U.S., we primarily sell our vaccines to government and non-government institutions.
PFIZER INC. AND SUBSIDIARY COMPANIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Deductions from Revenues––Our accruals for Medicare, Medicaid and related state program and performance-based contract rebates, chargebacks, sales allowances and sales returns and cash discounts are as follows:
| (MILLIONS) | (MILLIONS) | | July 4, 2021 | | December 31, 2020 | (MILLIONS) | | April 3, 2022 | | December 31, 2021 |
Reserve against Trade accounts receivable, less allowance for doubtful accounts | Reserve against Trade accounts receivable, less allowance for doubtful accounts | | $ | 959 | | | $ | 861 | | Reserve against Trade accounts receivable, less allowance for doubtful accounts | | $ | 933 | | | $ | 1,077 | |
Other current liabilities: | Other current liabilities: | | Other current liabilities: | |
Accrued rebates | Accrued rebates | | 3,301 | | | 3,017 | | Accrued rebates | | 3,858 | | | 3,811 | |
Other accruals | Other accruals | | 443 | | | 436 | | Other accruals | | 440 | | | 528 | |
Other noncurrent liabilities | Other noncurrent liabilities | | 384 | | | 399 | | Other noncurrent liabilities | | 299 | | | 433 | |
Total accrued rebates and other sales-related accruals | Total accrued rebates and other sales-related accruals | | $ | 5,087 | | | $ | 4,712 | | Total accrued rebates and other sales-related accruals | | $ | 5,530 | | | $ | 5,850 | |
Trade Accounts Receivable––Trade accounts receivable are stated at their net realizable value. The allowance for credit losses reflects our best estimate of expected credit losses of the receivables portfolio determined on the basis of historical experience, current information, and forecasts of future economic conditions. In developing the estimate for expected credit losses, trade accounts receivables are segmented into pools of assets depending on market (U.S. versus international), delinquency status, and customer type (high risk versus low risk and government versus non-government), and fixed reserve percentages are established for each pool of trade accounts receivables.
In determining the reserve percentages for each pool of trade accounts receivables, we considered our historical experience with certain customers and customer types, regulatory and legal environments, country and political risk, and other relevant current and future forecasted macroeconomic factors. These credit risk indicators are monitored on a quarterly basis to determine whether there have been any changes in the economic environment that would indicate the established reserve percentages should be adjusted, and are considered on a regional basis to reflect more geographic-specific metrics. Additionally, write-offs and recoveries of customer receivables are tracked against collections on a quarterly basis to determine whether the reserve percentages remain appropriate. When management becomes aware of certain customer-specific factors that impact credit risk,
PFIZER INC. AND SUBSIDIARY COMPANIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
specific allowances for these known troubled accounts are recorded. Trade accounts receivable are written off after all reasonable means to collect the full amount (including litigation, where appropriate) have been exhausted.
During the three and six months ended JulyApril 3, 2022 and April 4, 2021, and June 28, 2020, additions to the allowance for credit losses, write-offs and recoveries of customer receivables were not material to our condensed consolidated financial statements. For additional information on our trade accounts receivable, see Note 1G1H in our 20202021 Form 10-K.
D. Acquired In-Process Research and Development Expenses
In the first quarter of 2022, we began reporting acquired IPR&D expense as a separate line item in our consolidated statements of income. Acquired in-process research and development expenses includes costs incurred in connection with (a) all upfront and milestone payments on collaboration and in-license agreements, including premiums on equity securities and (b) asset acquisitions of acquired IPR&D. These costs were previously recorded in Research and development expenses. Prior periods have been revised to conform to the current period presentation. When we acquire net assets that do not constitute a business, as defined in U.S. GAAP, no goodwill is recognized and acquired IPR&D is expensed. The fair value of IPR&D acquired in connection with a business combination is recorded on the balance sheet as Identifiable intangible assets. See Notes 1E and 10 in our2021 Form 10-K.
Note 2.Acquisition, Discontinued Operations, and Equity-Method Investment and Collaborative Arrangement
A. Acquisition
Arena––On March 11, 2022, we acquired Arena, a clinical stage company, for $100 per share in cash. The total fair value of the consideration transferred was $6.6 billion ($6.2 billion, net of cash acquired). In addition, $138 million in payments to Arena employees for the fair value of previously unvested long-term incentive awards was recognized as post-closing compensation expense and recorded in Restructuring charges and certain acquisition-related costs (see Note 3).
Arena’s portfolio includes development-stage therapeutic candidates in gastroenterology, dermatology, and cardiology, including etrasimod, an oral, selective sphingosine 1-phosphate (S1P) receptor modulator currently in development for a range of immuno-inflammatory diseases including UC, Crohn’s Disease, atopic dermatitis, eosinophilic esophagitis, and alopecia areata. In connection with this acquisition, we provisionally recorded: (i) $5.5 billion in Identifiable intangible assets, consisting of $5.0 billion of IPR&D and $460 million of indefinite-lived Licensing agreements, (ii) $1.0 billion of Goodwill and (iii) $510 million of net deferred tax liabilities. The allocation of the consideration transferred to the assets acquired and the liabilities assumed has not yet been finalized.
PFIZER INC. AND SUBSIDIARY COMPANIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
B. Discontinued Operations
Meridian––On December 31, 2021, we completed the sale of our Meridian subsidiary. In the three months ended April 3, 2022, the amounts recorded under the interim TSAs and MSA were not material.
Upjohn Separation and Combination with Mylan
Mylan––On November 16, 2020, we completed the spin-off and the combination of the Upjohn Business with Mylan to form Viatris. See Note 1A.
In connection with this transaction, Pfizer and Viatris entered into various agreements to effect the separation and combination and to provide a framework for our relationship after the combination, including a separation and distribution agreement, interim operating models, including agency arrangements, manufacturing and supply agreements (MSAs), transition service agreements (TSAs),MSAs, TSAs, a tax matters agreement, and an employee matters agreement, among others. The interim agency operating model arrangements primarily include billings, collections and remittance of rebates that we are performing on a transitional basis on behalf of Viatris. Under the MSAs, Pfizer or Viatris, as the case may be, manufactures, labels and packages products for the other party. In the three and six months ended July 4, 2021, the amounts recorded under the abovethese agreements were not material to our consolidated results of operations.operations in the three months ended April 3, 2022 and April 4, 2021. Net amounts due from Viatris under the above agreements were approximately $434$133 million as of July 4, 2021April 3, 2022 and $401$53 million as of December 31, 2020.2021. The cash flows associated with the above agreements are included in Net cash provided by operating activities from continuing operations, except for a $277 million payment to Viatris made in the first quarter of 2021 pursuant to terms of the separation agreement, which is reported in Other financing activities, netand was recorded as a payable to Viatris in Other current liabilities as of December 31, 2020. In addition, Pfizer and Mylan had pre-existing arms-length commercial agreements, which are continuing with Viatris and are not material to Pfizer’s consolidated financial statements.
The operating results of the Upjohn Business and the Mylan-Japan collaboration are reported as Income from discontinued operations––net of tax.
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Components of Income from discontinued operations––net of tax: |
| | Three Months Ended(a) | | Six Months Ended(a) |
(MILLIONS) | | July 4, 2021 | | June 28, 2020 | | July 4, 2021 | | June 28, 2020 |
Revenues | | $ | 0 | | | $ | 1,937 | | | $ | 27 | | | $ | 3,883 | |
Costs and expenses: | | | | | | | | |
Cost of sales | | 0 | | | 458 | | | 14 | | | 900 | |
Selling, informational and administrative expenses | | 6 | | | 371 | | | (2) | | | 703 | |
Research and development expenses | | 0 | | | 54 | | | 1 | | | 105 | |
Amortization of intangible assets | | 0 | | | 36 | | | 0 | | | 72 | |
Restructuring charges and certain acquisition-related costs | | 0 | | | 2 | | | 0 | | | 17 | |
Other (income)/deductions––net | | 0 | | | 1 | | | 1 | | | 71 | |
Pre-tax income/(loss) from discontinued operations | | (6) | | | 1,015 | | | 13 | | | 2,015 | |
Provision/(benefit) for taxes on income | | (30) | | | 122 | | | (19) | | | 241 | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
Income from discontinued operations––net of tax | | $ | 24 | | | $ | 893 | | | $ | 32 | | | $ | 1,774 | |
(a)In the second quarter of 2021, Income from discontinued operations—net of tax reflects post-closing adjustments directly related to our discontinued operations, including tax and benefits-related adjustments. In the first six months of 2021, Income from discontinued operations—net of tax also includes the operations of the Mylan-Japan collaboration, which terminated during Pfizer’s international first quarter of 2021, and a post-closing adjustment for a legal matter directly related to the discontinued Upjohn Business. In the three and six months ended June 28, 2020, Income from discontinued operations—net of tax relates to the Upjohn Business and the Mylan-Japan collaboration and includes the change in accounting principle in the first quarter of 2021 to MTM Accounting, which has been applied on a retrospective basis for all prior periods presented. See Note 1C.
PFIZER INC. AND SUBSIDIARY COMPANIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
B.C. Equity-Method Investment
Formation of Consumer Healthcare JV
JV––
On July 31, 2019, we completed a transaction in which we and GSK combined our respective consumer healthcare businesses into a new JV that operates globally under the GSK Consumer Healthcare name. In exchange, we received a 32% equity stake in the new company and GSK owns the remaining 68%.
We are accounting for our interest in the Consumer Healthcare JV as an equity-method investment. The carrying value of our investment in the Consumer Healthcare JV is $16.4$15.8 billion as of July 4, 2021April 3, 2022 and $16.7$16.3 billion as of December 31, 20202021 and is reported as a private equity investment in Equity-method investments as of July 4, 2021April 3, 2022 and December 31, 2020.2021. The Consumer Healthcare JV is a foreign investee whose reporting currency is the U.K. pound, and therefore we translate its financial statements into U.S. dollars and recognize the impact of foreign currency translation adjustments in the carrying value of our investment and in other comprehensive income. The decrease in the value of our investment from December 31, 20202021 is primarily due to dividends totaling approximately $274 million, as well as $200$508 million in pre-tax foreign currency translation adjustments (see Note 6), as well as dividends totaling approximately $177 million, partially offset by our share of the JV’s earnings. We record our share of earnings from the Consumer Healthcare JV on a quarterly basis on a one-quarter lag in Other (income)/deductions––net. Our total share of the JV’s earnings generated in the firstfourth quarter of 2021, which we recorded in our operating results in the secondfirst quarter of 2021,2022, was $148$185 million. Our total share of the JV’s earnings generated in the fourth quarter of 2020, and first quarter of 2021, which we recorded in our operating results in the first six months ofquarter 2021, was $218$71 million. Our total share of the JV’s earnings generated in the first quarter of 2020, which we recorded in our operating results in the second quarter of 2020, was $129 million. Our total share of the JV’s earnings generated in the fourth quarter of 2019 and first quarter of 2020, which we recorded in our operating results in the first six months of 2020, was $140 million. See Note 4. The total amortization and adjustment of basis differences resulting from the excess of the initial fair value of our investment over the underlying equity in the carrying value of the net assets of the JV is included in Other (income)/deductions––net and was not material to our results of operations in the periods presented. See Note 4.
| | Summarized financial information for our equity method investee, the Consumer Healthcare JV, for the three and six months ending March 31, 2021, the most recent period available, and for the three and six months ending March 31, 2020, is as follows: | | |
Summarized financial information for our equity method investee, the Consumer Healthcare JV, for the three months ending December 31, 2021, the most recent period available, and for the three months ending December 31, 2020, is as follows: | | Summarized financial information for our equity method investee, the Consumer Healthcare JV, for the three months ending December 31, 2021, the most recent period available, and for the three months ending December 31, 2020, is as follows: | |
| | Three Months Ended | | Six Months Ended | | | | Three Months Ended | |
(MILLIONS) | (MILLIONS) | | March 31, 2021 | | March 31, 2020 | | March 31, 2021 | | March 31, 2020 | | (MILLIONS) | | | December 31, 2021 | | December 31, 2020 | |
Net sales | Net sales | | $ | 3,180 | | | $ | 3,503 | | | $ | 6,275 | | | $ | 6,691 | | | Net sales | | | $ | 3,420 | | | $ | 3,096 | | |
Cost of sales | Cost of sales | | (1,169) | | | (1,394) | | | (2,356) | | | (3,205) | | | Cost of sales | | | (1,312) | | | (1,188) | | |
Gross profit | Gross profit | | $ | 2,011 | | | $ | 2,109 | | | $ | 3,919 | | | $ | 3,486 | | | Gross profit | | | $ | 2,108 | | | $ | 1,908 | | |
Income from continuing operations | Income from continuing operations | | 483 | | | 425 | | | 716 | | | 471 | | | Income from continuing operations | | | 590 | | | 233 | | |
Net income | Net income | | 483 | | | 425 | | | 716 | | | 471 | | | Net income | | | 590 | | | 233 | | |
Income attributable to shareholders | Income attributable to shareholders | | 461 | | | 405 | | | 682 | | | 441 | | | Income attributable to shareholders | | | 578 | | | 221 | | |
In connection with GSK’s previously announced planned demerger of at least 80% of GSK’s 68% equity interest in the Consumer Healthcare JV, in March 2022 the Consumer Healthcare JV completed its offering of a total aggregate principal amount of $8.75 billion in U.S. dollar-denominated senior notes of various maturities, €2.35 billion in euro-denominated senior notes of various maturities and £700 million in U.K. pound-denominated senior notes of various maturities (collectively, the “notes”). The notes are guaranteed by GSK generally up to and excluding the date of the demerger (the “Guarantee Assumption Date”). We have agreed to indemnify GSK for 32% (representing our pro rata equity interest in the Consumer Healthcare JV) of any amount payable by GSK pursuant to its guarantee of the notes. Our indemnity is provided solely for the benefit of GSK and will terminate automatically as of the Guarantee Assumption date. Neither we nor any of our subsidiaries is an issuer or guarantor of any of the notes.
PFIZER INC. AND SUBSIDIARY COMPANIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Following its issuance of the notes in March 2022, in our fiscal second quarter of 2022, the Consumer Healthcare JV loaned to us and GSK the net proceeds received from the notes on a pro rata equity ownership basis, for which we received a loan of £2.9 billion, at an interest rate of 1.365% per annum payable semi-annually in arrears. The loan will mature and be repaid upon the earlier of two business days after approval of the demerger transaction by GSK’s shareholders or two business days after the occurrence of a mandatory redemption event with respect to the notes. In conjunction with the demerger, we will receive our 32% share of the proceeds repaid by us and GSK as a dividend from the Consumer Healthcare JV.
D. Collaboration Arrangement
Collaboration with Biohaven––In November 2021, we entered into a collaboration and license agreement and related sublicense agreement with Biohaven to commercialize rimegepant and zavegepant for the treatment and prevention of migraines outside of the U.S., subject to regulatory approval. Biohaven will continue to lead R&D globally and we have the exclusive right to commercialization globally, outside of the U.S. Upon the closing of the transaction on January 4, 2022, we paid Biohaven $500 million, including an upfront payment of $150 million and an equity investment of $350 million. We recognized $263 million for the upfront payment and premium paid on our equity investment in Acquired in-process research and development expenses. Biohaven is also eligible to receive up to $740 million in non-U.S. commercialization milestone payments, in addition to tiered double-digit royalties on net sales outside of the U.S. In addition to the milestone payments and royalties above, we will also reimburse Biohaven for the portion of certain additional milestone payments and royalties due to third parties in accordance with preexisting Biohaven agreements, which are attributed to ex-U.S. sales.
Note 3. Restructuring Charges and Other Costs Associated with Acquisitions and Cost-Reduction/Productivity Initiatives
A. Transforming to a More Focused Company Program
With the formation of the Consumer Healthcare JV in 2019 and the spin-off of our Upjohn Business in the fourth quarter of 2020, Pfizer has transformed into a focused, global leader in science-based innovative medicines and vaccines. We have undertaken efforts to ensure our cost base alignsand support model align appropriately with our new operating structure. While certain direct costs transferred to the Consumer Healthcare JV, and to the Upjohn Business in connection with the spin-off, there are indirect costs which did not transfer. In addition, weThis program is primarily composed of the following three initiatives:
•We are taking steps to restructure our corporate enabling functions to appropriately support and drive the purpose of our business, and R&D and PGS platform functions. The program costs discussed below are expected to be incurred primarily from 2020 through 2022, and may be rounded and represent approximations.
We expect costs, for this program, primarily related to restructuring our corporate enabling functions, to total $1.6$1.8 billion, on a pre-tax basis, with substantially all costs to be cash expenditures. Actions include, among others, changes in location of certain activities, expanded use and co-location of centers of excellence and shared services, and increased use of digital technologies. The associated actions and the specific costs will primarily include severance and benefit plan impacts, exit costs as well as associated implementation costs.
•In addition, we are transforming our commercial go-to market model in the way we engage patients and physicians. We expect costs of $1.1 billion, with substantially all costs to be cash expenditures. Actions include, among others, centralization of certain activities and enhanced use of digital technologies. The costs for this effort primarily include severance and associated implementation costs.
•We are also optimizing our manufacturing network under this program and incurring one-time costs for cost-reduction initiatives related to our manufacturing operations. We expect to incur costs of $800 million, with approximately 25% of the costs to be non-cash. The costs for this effort include, among other things, severance costs, implementation costs, product transfer costs, site exit costs, as well as accelerated depreciation.
The program costs discussed above are expected to be incurred primarily from 2020 through 2022, and may be rounded and represent approximations.
From the start of this program in the fourth quarter of 2019 through April 3, 2022, we incurred costs of $2.3 billion, of which $875 million is associated with Biopharma ($20 million in 2022, $712 million in 2021, $79 million in 2020 and $64 million in 2019).
PFIZER INC. AND SUBSIDIARY COMPANIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Also, as part of this program, we expect to incur costs related to manufacturing network optimization, including certain legacy cost-reduction initiatives, of $500 million, with approximately 20% of the costs to be non-cash. The costs for this effort include, among other things, implementation costs, product transfer costs, site exit costs, as well as accelerated depreciation.
From the start of this program in the fourth quarter of 2019 through July 4, 2021, we incurred costs of $1.2 billion.
B. Key Activities
| The following summarizes acquisitions and cost-reduction/productivity initiatives costs and credits, which are composed primarily of the Transforming to a More Focused Company program: | |
The following summarizes acquisitions and cost-reduction/productivity initiatives costs and credits: | | The following summarizes acquisitions and cost-reduction/productivity initiatives costs and credits: |
| | Three Months Ended | | Six Months Ended | | | Three Months Ended |
(MILLIONS) | (MILLIONS) | | July 4, 2021 | | June 28, 2020 | | July 4, 2021 | | June 28, 2020 | (MILLIONS) | | | April 3, 2022 | | April 4, 2021 |
Restructuring charges/(credits): | Restructuring charges/(credits): | | | | | | | | | Restructuring charges/(credits): | | | | | |
Employee terminations | Employee terminations | | $ | (4) | | | $ | 345 | | | $ | 19 | | | $ | 355 | | Employee terminations | | | $ | 25 | | | $ | 22 | |
Asset impairments | Asset impairments | | 2 | | | (8) | | | (2) | | | 23 | | Asset impairments | | | 8 | | | (5) | |
Exit costs/(credits) | Exit costs/(credits) | | (3) | | | 1 | | | (3) | | | 1 | | Exit costs/(credits) | | | 11 | | | — | |
Restructuring charges/(credits)(a) | Restructuring charges/(credits)(a) | | (5) | | | 338 | | | 14 | | | 379 | | Restructuring charges/(credits)(a) | | | 43 | | | 17 | |
Transaction costs(b) | Transaction costs(b) | | 0 | | | 11 | | | 0 | | | 14 | | Transaction costs(b) | | | 6 | | | — | |
Integration costs and other(c) | Integration costs and other(c) | | 4 | | | 11 | | | 8 | | | 21 | | Integration costs and other(c) | | | 142 | | | 5 | |
Restructuring charges and certain acquisition-related costs | Restructuring charges and certain acquisition-related costs | | (1) | | | 360 | | | 22 | | | 414 | | Restructuring charges and certain acquisition-related costs | | | 192 | | | 22 | |
Net periodic benefit costs recorded in Other (income)/deductions––net(d) | | 4 | | | 1 | | | 12 | | | 2 | | |
Additional depreciation––asset restructuring recorded in our condensed consolidated statements of income as follows(e): | | | | | | | | | |
Net periodic benefit costs/(credits) recorded in Other (income)/deductions––net | | Net periodic benefit costs/(credits) recorded in Other (income)/deductions––net | | | (6) | | | 8 | |
| Additional depreciation––asset restructuring recorded in our condensed consolidated statements of income, mainly in Cost of sales(d) | | Additional depreciation––asset restructuring recorded in our condensed consolidated statements of income, mainly in Cost of sales(d) | | | 9 | | | 6 | |
Implementation costs recorded in our condensed consolidated statements of income as follows(e): | | Implementation costs recorded in our condensed consolidated statements of income as follows(e): | | | | | |
Cost of sales | Cost of sales | | 31 | | | 4 | | | 41 | | | 10 | | Cost of sales | | | 12 | | | 11 | |
Selling, informational and administrative expenses | Selling, informational and administrative expenses | | 16 | | | 0 | | | 16 | | | 0 | | Selling, informational and administrative expenses | | | 74 | | | 64 | |
Research and development expenses | | 0 | | | 2 | | | 0 | | | (3) | | |
Total additional depreciation––asset restructuring | | 47 | | | 6 | | | 56 | | | 6 | | |
Implementation costs recorded in our condensed consolidated statements of income as follows(f): | | | | | | | | | |
Cost of sales | | 10 | | | 9 | | | 21 | | | 17 | | |
Selling, informational and administrative expenses | | 80 | | | 63 | | | 144 | | | 78 | | |
Research and development expenses | | 0 | | | 1 | | | 0 | | | 1 | | |
| | Total implementation costs | Total implementation costs | | 90 | | | 73 | | | 166 | | | 96 | | Total implementation costs | | | 85 | | | 75 | |
Total costs associated with acquisitions and cost-reduction/productivity initiatives | Total costs associated with acquisitions and cost-reduction/productivity initiatives | | $ | 140 | | | $ | 441 | | | $ | 256 | | | $ | 518 | | Total costs associated with acquisitions and cost-reduction/productivity initiatives | | | $ | 280 | | | $ | 111 | |
(a)Primarily represents cost reduction initiatives.
(b)Represents external costs for banking, legal, accounting and other similar services.
(c)Represents external, incremental costs directly related to integrating acquired businesses, such as expenditures for consulting and the integration of systems and processes, and certain other qualifying costs.
(d)Amounts In the first quarter of 2022, integration costs and other were mostly related to our acquisition of Arena, including $138 million in payments to Arena employees for the three and six months ended June 28, 2020 include the impactfair value of a change in accounting principle.previously unvested long-term incentive awards. See Note 1C.2A.
(e)(d)Represents the impact of changes in the estimated useful lives of assets involved in restructuring actions.
(f)(e)Represents external, incremental costs directly related to implementing our non-acquisition-related cost-reduction/productivity initiatives.
| The following summarizes the components and changes in restructuring accruals: | The following summarizes the components and changes in restructuring accruals: | The following summarizes the components and changes in restructuring accruals: |
(MILLIONS) | (MILLIONS) | | Employee Termination Costs | | Asset Impairment Charges | | Exit Costs | | Accrual | (MILLIONS) | | Employee Termination Costs | | Asset Impairment Charges | | Exit Costs | | Accrual |
Balance, December 31, 2020(a) | | $ | 782 | | | $ | 0 | | | $ | 15 | | | $ | 798 | | |
Balance, December 31, 2021(a) | | Balance, December 31, 2021(a) | | $ | 1,014 | | | $ | — | | | $ | 57 | | | $ | 1,071 | |
Provision | Provision | | 19 | | | (2) | | | (3) | | | 14 | | Provision | | 25 | | | 8 | | | 11 | | | 43 | |
Utilization and other(b) | Utilization and other(b) | | (215) | | | 2 | | | (1) | | | (215) | | Utilization and other(b) | | (95) | | | (8) | | | (59) | | | (163) | |
Balance, July 4, 2021(c) | | $ | 585 | | | $ | 0 | | | $ | 11 | | | $ | 596 | | |
Balance, April 3, 2022(c) | | Balance, April 3, 2022(c) | | $ | 943 | | | $ | — | | | $ | 9 | | | $ | 952 | |
(a)Included in Other current liabilities ($628816 million) and Other noncurrent liabilities ($169255 million).
(b)Includes adjustments for foreign currency translation.
(c)Included in Other current liabilities ($473812 million) and Other noncurrent liabilities ($123140 million).
PFIZER INC. AND SUBSIDIARY COMPANIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Note 4. Other (Income)/Deductions—Net
| Components of Other (income)/deductions––net include: | Components of Other (income)/deductions––net include: | Components of Other (income)/deductions––net include: |
| | | Three Months Ended | | Six Months Ended | | | | Three Months Ended |
(MILLIONS) | (MILLIONS) | | July 4, 2021 | | June 28, 2020 | | July 4, 2021 | | June 28, 2020 | (MILLIONS) | | | April 3, 2022 | | April 4, 2021 |
Interest income | Interest income | | $ | (13) | | | $ | (19) | | | $ | (12) | | | $ | (53) | | Interest income | | | $ | (14) | | | $ | — | |
Interest expense | Interest expense | | 316 | | | 367 | | | 651 | | | 757 | | Interest expense | | | 322 | | | 336 | |
Net interest expense | Net interest expense | | 303 | | | 348 | | | 639 | | | 704 | | Net interest expense | | | 308 | | | 336 | |
Royalty-related income | Royalty-related income | | (212) | | | (191) | | | (388) | | | (310) | | Royalty-related income | | | (173) | | | (176) | |
Net (gains)/losses on asset disposals | Net (gains)/losses on asset disposals | | (58) | | | 1 | | | (98) | | | 2 | | Net (gains)/losses on asset disposals | | | (1) | | | (39) | |
Net (gains)/losses recognized during the period on equity securities(a) | Net (gains)/losses recognized during the period on equity securities(a) | | (800) | | | (732) | | | (1,200) | | | (478) | | Net (gains)/losses recognized during the period on equity securities(a) | | | 699 | | | (401) | |
Income from collaborations, out-licensing arrangements and sales of compound/product rights(b) | Income from collaborations, out-licensing arrangements and sales of compound/product rights(b) | | (21) | | | (100) | | | (252) | | | (215) | | Income from collaborations, out-licensing arrangements and sales of compound/product rights(b) | | | (9) | | | (231) | |
Net periodic benefit costs/(credits) other than service costs(c) | Net periodic benefit costs/(credits) other than service costs(c) | | (237) | | | (191) | | | (503) | | | (294) | | Net periodic benefit costs/(credits) other than service costs(c) | | | (283) | | | (266) | |
Certain legal matters, net(d) | Certain legal matters, net(d) | | 369 | | | 14 | | | 420 | | | 22 | | Certain legal matters, net(d) | | | 79 | | | 51 | |
| Consumer Healthcare JV equity method (income)/loss(e) | | (140) | | | (126) | | | (202) | | | (92) | | |
Consumer Healthcare JV equity method (income)/loss(c) | | Consumer Healthcare JV equity method (income)/loss(c) | | | (184) | | | (62) | |
Other, net | Other, net | | (201) | | | 22 | | | (417) | | | (104) | | Other, net | | | (88) | | | (216) | |
Other (income)/deductions––net | Other (income)/deductions––net | | $ | (998) | | | $ | (955) | | | $ | (2,001) | | | $ | (764) | | Other (income)/deductions––net | | | $ | 350 | | | $ | (1,004) | |
(a)The gainslosses in the secondfirst quarter and first six months of 20212022 include, among other things, unrealized gainslosses of $917$473 million and $1.0 billion, respectively, related to investmentsour investment in BioNTech and Cerevel Therapeutics, LLC.BioNTech. The gains in the secondfirst quarter and first six months of 20202021 included, among other things, unrealized gains of $568$409 million and $501 million, respectively, related to our investments in Allogene Therapeutics, Inc. and BioNTech.
(b)The first six monthsquarter of 2021 includes,included, among other things, $188 million of net collaboration income from BioNTech in the first quarter of 2021 related to the COVID-19 vaccine. The second quarter and first six months of 2020 mainly included, among other things, $40 million of milestone income from Puma Biotechnology, Inc. related to Neratinib regulatory approvals in the EU, and $30 million of milestone income from Lilly related to the first commercial sale in the U.S. of LOXO-292 for the treatment of RET fusion-positive NSCLC. The first six months of 2020 also included an upfront payment to us of $75 million from our sale of our CK1 assets to Biogen, Inc.Comirnaty.
(c)Amounts include the impact of a change in accounting principle. See Notes 1C and 10.
(d)The second quarter and first six months of 2021 primarily include an amount to resolve a Multi-District Litigation relating to EpiPen pending against the Company in the U.S. District Court for the District of Kansas for $345 million, which remains subject to court approval. See Note 12A1.
(e)See Note 2B2C.
Note 5. Tax Matters
A. Taxes on Income from Continuing Operations
Our effective tax rate for continuing operations was 15.8% for the second quarter of 2021, compared to 14.0% for the second quarter of 2020, and was 15.0%12.9% for the first six monthsquarter of 2021,2022, compared to 13.3%14.2% for the first six monthsquarter of 2020.
2021. The higherlower effective tax rate for the secondfirst quarter and first six months of 2021, compared2022 was primarily due to the second quarter and first six months of 2020, was due to afavorable change in the jurisdictional mix of earnings primarily related to BNT162b2.as a result of operating fluctuations in the normal course of business.
We elected, with the filing of our 2018 U.S. Federal Consolidated Income Tax Return, to pay our initial estimated $15 billion repatriation tax liability on accumulated post-1986 foreign earnings over eight years through 2026. The thirdfourth annual installment of this liability was paid by its April 15, 202118, 2022 due date. The fourth annual installment is due April 15, 2022date and is reported in current Income taxes payable as of July 4, 2021. Theand the remaining liability is reported in noncurrent Other taxes payable.payable as of April 3, 2022. Our obligations may vary as a result of changes in our uncertain tax positions and/or availability of attributes such as foreign tax and other credit carryforwards.
B. Tax Contingencies
We are subject to income tax in many jurisdictions, and a certain degree of estimation is required in recording the assets and liabilities related to income taxes. All of our tax positions are subject to audit by the local taxing authorities in each tax jurisdiction. These tax audits can involve complex issues, interpretations and judgments and the resolution of matters may span multiple years, particularly if subject to negotiation or litigation.
The U.S. is one of our major tax jurisdictions, and we are regularly audited by the IRS. With respect to Pfizer, the IRS has issued Revenue Agent’s Reports (RARs) for tax years 2011-2013 and 2014-2015. We are not in agreement with the RARs and are currently appealing certain disputed issues. Tax years 2016-2018 are currently under audit. Tax years 2019-20212019-2022 are open
PFIZER INC. AND SUBSIDIARY COMPANIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
but not under audit. All other tax years are closed. In addition to the open audit years in the U.S., we have open audit years in certain major international tax jurisdictions dating back to 2010.2011.
For additional information, see Note 5D in our 20202021 Form 10-K.
PFIZER INC. AND SUBSIDIARY COMPANIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
C. Tax Provision/(Benefit) on Other Comprehensive Income/(Loss)
| Components of Tax provision/(benefit) on other comprehensive income/(loss) include: | Components of Tax provision/(benefit) on other comprehensive income/(loss) include: | Components of Tax provision/(benefit) on other comprehensive income/(loss) include: |
| | Three Months Ended | | Six Months Ended | | | Three Months Ended |
(MILLIONS) | (MILLIONS) | | July 4, 2021 | | June 28, 2020 | | July 4, 2021 | | June 28, 2020 | (MILLIONS) | | | April 3, 2022 | | April 4, 2021 |
Foreign currency translation adjustments, net(a) | Foreign currency translation adjustments, net(a) | | $ | (19) | | | $ | 70 | | | $ | 2 | | | $ | (177) | | Foreign currency translation adjustments, net(a) | | | $ | (72) | | | $ | 21 | |
Unrealized holding gains/(losses) on derivative financial instruments, net | Unrealized holding gains/(losses) on derivative financial instruments, net | | (51) | | | 51 | | | 7 | | | (82) | | Unrealized holding gains/(losses) on derivative financial instruments, net | | | 32 | | | 59 | |
Reclassification adjustments for (gains)/losses included in net income | Reclassification adjustments for (gains)/losses included in net income | | 1 | | | (35) | | | 35 | | | (20) | | Reclassification adjustments for (gains)/losses included in net income | | | (22) | | | 34 | |
| | (50) | | | 16 | | | 43 | | | (102) | | | | 10 | | | 93 | |
Unrealized holding gains/(losses) on available-for-sale securities, net | Unrealized holding gains/(losses) on available-for-sale securities, net | | 7 | | | 5 | | | 17 | | | (1) | | Unrealized holding gains/(losses) on available-for-sale securities, net | | | (17) | | | 10 | |
Reclassification adjustments for (gains)/losses included in net income | Reclassification adjustments for (gains)/losses included in net income | | 8 | | | 6 | | | (23) | | | 7 | | Reclassification adjustments for (gains)/losses included in net income | | | 29 | | | (30) | |
| | 15 | | | 11 | | | (5) | | | 6 | | | | 12 | | | (20) | |
| Reclassification adjustments related to amortization of prior service costs and other, net | Reclassification adjustments related to amortization of prior service costs and other, net | | (8) | | | (11) | | | (17) | | | (21) | | Reclassification adjustments related to amortization of prior service costs and other, net | | | (9) | | | (10) | |
| Reclassification adjustments related to curtailments of prior service costs and other, net | | Reclassification adjustments related to curtailments of prior service costs and other, net | | | (2) | | | — | |
Other | Other | | (1) | | | 1 | | | (1) | | | 1 | | Other | | | — | | | — | |
| | (8) | | | (9) | | | (18) | | | (20) | | | | (11) | | | (10) | |
Tax provision/(benefit) on other comprehensive income/(loss) | Tax provision/(benefit) on other comprehensive income/(loss) | | $ | (63) | | | $ | 87 | | | $ | 21 | | | $ | (293) | | Tax provision/(benefit) on other comprehensive income/(loss) | | | $ | (60) | | | $ | 84 | |
(a)Taxes are not provided for foreign currency translation adjustments relating to investments in international subsidiaries that we intend to hold indefinitely.
Note 6. Accumulated Other Comprehensive Loss, Excluding Noncontrolling Interests
| The following summarizes the changes, net of tax, in Accumulated other comprehensive loss: | The following summarizes the changes, net of tax, in Accumulated other comprehensive loss: | The following summarizes the changes, net of tax, in Accumulated other comprehensive loss: |
| | | Net Unrealized Gains/(Losses) | | Benefit Plans | | | | | Net Unrealized Gains/(Losses) | | | Benefit Plans | | |
(MILLIONS) | (MILLIONS) | | Foreign Currency Translation Adjustments | | Derivative Financial Instruments | | Available-For-Sale Securities | | | Prior Service (Costs)/Credits and Other | | Accumulated Other Comprehensive Income/(Loss) | (MILLIONS) | | Foreign Currency Translation Adjustments | | Derivative Financial Instruments | | Available-For-Sale Securities | | | Prior Service (Costs)/Credits and Other | | Accumulated Other Comprehensive Income/(Loss) |
Balance, December 31, 2020(a) | | $ | (5,450) | | | $ | (428) | | | $ | 116 | | | | $ | 452 | | | $ | (5,310) | | |
Balance, December 31, 2021 | | Balance, December 31, 2021 | | $ | (6,172) | | | $ | 119 | | | $ | (220) | | | | $ | 377 | | | $ | (5,897) | |
Other comprehensive income/(loss)(b)(a) | Other comprehensive income/(loss)(b)(a) | | 495 | | | 160 | | | (37) | | | | (66) | | | 552 | | Other comprehensive income/(loss)(b)(a) | | (291) | | | (20) | | | 87 | | | | (36) | | | (260) | |
| Balance, July 4, 2021 | | $ | (4,955) | | | $ | (268) | | | $ | 79 | | | | $ | 386 | | | $ | (4,758) | | |
Balance, April 3, 2022 | | Balance, April 3, 2022 | | $ | (6,463) | | | $ | 99 | | | $ | (133) | | | | $ | 341 | | | $ | (6,157) | |
(a)Amounts include the impact of a change in accounting principle. See Note 1C.
(b)Amounts do not include foreign currency translation adjustments attributable to noncontrolling interests. Foreign currency translation adjustments primarily include gains from the strengthening of the U.K. pound, Canadian dollar and euro against the U.S. dollar, and net gains related to the impact of our net investment hedging program, partially offset by net losses from foreign currency translation adjustments related to our equity-methodequity method investment in the Consumer Healthcare JV (see Note 2B2C).and the impact of our net investment hedging program.
PFIZER INC. AND SUBSIDIARY COMPANIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Note 7. Financial Instruments
A. Fair Value Measurements
Financial Assets and Liabilities Measured at Fair Value on a Recurring Basis and Fair Value Hierarchy, using a Market Approach:
| | | July 4, 2021 | | | December 31, 2020 | | April 3, 2022 | | | December 31, 2021 |
(MILLIONS) | (MILLIONS) | | Total | | Level 1 | | Level 2 | | | Total | | Level 1 | | Level 2 | (MILLIONS) | | Total | | Level 1 | | Level 2 | | | Total | | Level 1 | | Level 2 |
Financial assets: | Financial assets: | | | | | | | | | | | | | | Financial assets: | | | | | | | | | | | | | |
Short-term investments | Short-term investments | | | | Short-term investments | | | |
Classified as equity securities with readily determinable fair values: | Classified as equity securities with readily determinable fair values: | | | | Classified as equity securities with readily determinable fair values: | | | |
Money market funds | Money market funds | | $ | 2,284 | | | $ | 0 | | | $ | 2,284 | | | | $ | 567 | | | $ | 0 | | | $ | 567 | | Money market funds | | $ | 2,759 | | | $ | — | | | $ | 2,759 | | | | $ | 5,365 | | | $ | — | | | $ | 5,365 | |
| Classified as available-for-sale debt securities: | Classified as available-for-sale debt securities: | | | | Classified as available-for-sale debt securities: | | | |
Government and agency—non-U.S. | Government and agency—non-U.S. | | 12,448 | | | 0 | | | 12,448 | | | | 7,719 | | | 0 | | | 7,719 | | Government and agency—non-U.S. | | 14,548 | | | — | | | 14,548 | | | | 17,318 | | | — | | | 17,318 | |
Government and agency—U.S. | Government and agency—U.S. | | 260 | | | 0 | | | 260 | | | | 982 | | | 0 | | | 982 | | Government and agency—U.S. | | 1,830 | | | — | | | 1,830 | | | | 4,050 | | | — | | | 4,050 | |
Corporate and other | Corporate and other | | 1,317 | | | 0 | | | 1,317 | | | | 1,008 | | | 0 | | | 1,008 | | Corporate and other | | 958 | | | — | | | 958 | | | | 647 | | | — | | | 647 | |
| | 14,025 | | | 0 | | | 14,025 | | | | 9,709 | | | 0 | | | 9,709 | | | 17,337 | | | — | | | 17,337 | | | | 22,014 | | | — | | | 22,014 | |
Total short-term investments | Total short-term investments | | 16,309 | | | 0 | | | 16,309 | | | | 10,276 | | | 0 | | | 10,276 | | Total short-term investments | | 20,096 | | | — | | | 20,096 | | | | 27,379 | | | — | | | 27,379 | |
Other current assets | Other current assets | | | | | | | | | | | | | | Other current assets | | | | | | | | | | | | | |
Derivative assets: | Derivative assets: | | | | Derivative assets: | | | |
Interest rate contracts | Interest rate contracts | | 2 | | | 0 | | | 2 | | | | 18 | | | 0 | | | 18 | | Interest rate contracts | | 5 | | | — | | | 5 | | | | 4 | | | — | | | 4 | |
Foreign exchange contracts | Foreign exchange contracts | | 289 | | | 0 | | | 289 | | | | 234 | | | 0 | | | 234 | | Foreign exchange contracts | | 832 | | | — | | | 832 | | | | 704 | | | — | | | 704 | |
Total other current assets | Total other current assets | | 290 | | | 0 | | | 290 | | | | 251 | | | 0 | | | 251 | | Total other current assets | | 837 | | | — | | | 837 | | | | 709 | | | — | | | 709 | |
Long-term investments | Long-term investments | | | | | | | | | | | | | | Long-term investments | | | | | | | | | | | | | |
Classified as equity securities with readily determinable fair values(a) | Classified as equity securities with readily determinable fair values(a) | | 3,736 | | | 3,711 | | | 25 | | | | 2,809 | | | 2,776 | | | 32 | | Classified as equity securities with readily determinable fair values(a) | | 3,486 | | | 3,470 | | | 15 | | | | 3,876 | | | 3,849 | | | 27 | |
| Classified as available-for-sale debt securities: | Classified as available-for-sale debt securities: | | | | Classified as available-for-sale debt securities: | | | |
Government and agency—non-U.S. | Government and agency—non-U.S. | | 9 | | | 0 | | | 9 | | | | 6 | | | 0 | | | 6 | | Government and agency—non-U.S. | | 519 | | | — | | | 519 | | | | 465 | | | — | | | 465 | |
Government and agency—U.S. | Government and agency—U.S. | | 54 | | | 0 | | | 54 | | | | 121 | | | 0 | | | 121 | | Government and agency—U.S. | | 1 | | | — | | | 1 | | | | 6 | | | — | | | 6 | |
Corporate and other | Corporate and other | | 0 | | | 0 | | | 0 | | | | 0 | | | 0 | | | 0 | | Corporate and other | | 49 | | | — | | | 49 | | | | 50 | | | — | | | 50 | |
| | 63 | | | 0 | | | 63 | | | | 128 | | | 0 | | | 128 | | | 569 | | | — | | | 569 | | | | 521 | | | — | | | 521 | |
Total long-term investments | Total long-term investments | | 3,799 | | | 3,711 | | | 88 | | | | 2,936 | | | 2,776 | | | 160 | | Total long-term investments | | 4,055 | | | 3,470 | | | 584 | | | | 4,397 | | | 3,849 | | | 548 | |
Other noncurrent assets | Other noncurrent assets | | | | | | | | | | | | | | Other noncurrent assets | | | | | | | | | | | | | |
Derivative assets: | Derivative assets: | | | | Derivative assets: | | | |
Interest rate contracts | Interest rate contracts | | 23 | | | 0 | | | 23 | | | | 117 | | | 0 | | | 117 | | Interest rate contracts | | — | | | — | | | — | | | | 16 | | | — | | | 16 | |
Foreign exchange contracts | Foreign exchange contracts | | 142 | | | 0 | | | 142 | | | | 5 | | | 0 | | | 5 | | Foreign exchange contracts | | 267 | | | — | | | 267 | | | | 242 | | | — | | | 242 | |
Total derivative assets | Total derivative assets | | 165 | | | 0 | | | 165 | | | | 122 | | | 0 | | | 122 | | Total derivative assets | | 267 | | | — | | | 267 | | | | 259 | | | — | | | 259 | |
Insurance contracts(b) | Insurance contracts(b) | | 767 | | | 0 | | | 767 | | | | 693 | | | 0 | | | 693 | | Insurance contracts(b) | | 765 | | | — | | | 765 | | | | 808 | | | — | | | 808 | |
Total other noncurrent assets | Total other noncurrent assets | | 931 | | | 0 | | | 931 | | | | 814 | | | 0 | | | 814 | | Total other noncurrent assets | | 1,032 | | | — | | | 1,032 | | | | 1,067 | | | — | | | 1,067 | |
Total assets | Total assets | | $ | 21,330 | | | $ | 3,711 | | | $ | 17,618 | | | | $ | 14,278 | | | $ | 2,776 | | | $ | 11,501 | | Total assets | | $ | 26,020 | | | $ | 3,470 | | | $ | 22,550 | | | | $ | 33,552 | | | $ | 3,849 | | | $ | 29,703 | |
| Financial liabilities: | Financial liabilities: | | | | Financial liabilities: | | | |
Other current liabilities | Other current liabilities | | | | Other current liabilities | | | |
Derivative liabilities: | Derivative liabilities: | | | | Derivative liabilities: | | | |
| Foreign exchange contracts | Foreign exchange contracts | | $ | 308 | | | $ | 0 | | | $ | 308 | | | | $ | 501 | | | $ | 0 | | | $ | 501 | | Foreign exchange contracts | | $ | 330 | | | $ | — | | | $ | 330 | | | | $ | 476 | | | $ | — | | | $ | 476 | |
Total other current liabilities | Total other current liabilities | | 308 | | | 0 | | | 308 | | | | 501 | | | 0 | | | 501 | | Total other current liabilities | | 330 | | | — | | | 330 | | | | 476 | | | — | | | 476 | |
Other noncurrent liabilities | Other noncurrent liabilities | | | | | | | | | | | | | | Other noncurrent liabilities | | | | | | | | | | | | | |
Derivative liabilities: | Derivative liabilities: | | | | Derivative liabilities: | | | |
| Interest rate contracts | | Interest rate contracts | | 140 | | | — | | | 140 | | | | — | | | — | | | — | |
Foreign exchange contracts | Foreign exchange contracts | | 651 | | | 0 | | | 651 | | | | 599 | | | 0 | | | 599 | | Foreign exchange contracts | | 460 | | | — | | | 460 | | | | 405 | | | — | | | 405 | |
Total other noncurrent liabilities | Total other noncurrent liabilities | | 651 | | | 0 | | | 651 | | | | 599 | | | 0 | | | 599 | | Total other noncurrent liabilities | | 600 | | | — | | | 600 | | | | 405 | | | — | | | 405 | |
Total liabilities | Total liabilities | | $ | 959 | | | $ | 0 | | | $ | 959 | | | | $ | 1,100 | | | $ | 0 | | | $ | 1,100 | | Total liabilities | | $ | 930 | | | $ | — | | | $ | 930 | | | | $ | 881 | | | $ | — | | | $ | 881 | |
(a)Long-term equity securities of $181$155 million as of July 4, 2021April 3, 2022 and $190$194 million as of December 31, 20202021 were held in restricted trusts for U.S. non-qualified employee benefit plans.
(b)Includes life insurance policies held in restricted trusts for U.S. non-qualified employee benefit plans. The underlying invested assets in these contracts are marketable securities, which are carried at fair value, with changes in fair value recognized in Other (income)/deductions—net (see Note 4).
PFIZER INC. AND SUBSIDIARY COMPANIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Financial Assets and Liabilities Not Measured at Fair Value on a Recurring Basis
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Carrying values and estimated fair values using a market approach: |
| | July 4, 2021 | | | | December 31, 2020 |
(MILLIONS) | | Carrying Value | | Estimated Fair Value at Level 2 | | | | Carrying Value | | Estimated Fair Value at Level 2 |
Financial Liabilities | | | | | | | | | | |
Long-term debt, excluding the current portion | | $ | 35,354 | | | $ | 41,725 | | | | | $ | 37,133 | | | $ | 45,533 | |
Basis––The carrying value of Long-term debt, excluding the current portion was $36 billion as of April 3, 2022 and $36 billion as of December 31, 2021. The estimated fair value of such debt, using a market approach and Level 2 inputs, was $38 billion as of April 3, 2022 and $42 billion as of December 31, 2021.The differences between the estimated fair values and carrying values of held-to-maturity debt securities, private equity securities, long-term receivables and short-term borrowings not measured at fair value on a recurring basis were not significant as of July 4, 2021April 3, 2022 and December 31, 2020.2021. The fair value measurements of our held-to-maturity debt securities and short-term borrowings are based on Level 2 inputs. The fair value measurements of our long-term receivables and private equity securities are based on Level 3 inputs.
B. Investments
Total Short-Term, Long-Term and Equity-Method Investments
| The following summarizes our investments by classification type: | The following summarizes our investments by classification type: | The following summarizes our investments by classification type: |
(MILLIONS) | (MILLIONS) | | July 4, 2021 | | December 31, 2020 | (MILLIONS) | | April 3, 2022 | | December 31, 2021 |
Short-term investments | Short-term investments | | | | | Short-term investments | | | | |
Equity securities with readily determinable fair values(a) | Equity securities with readily determinable fair values(a) | | $ | 2,284 | | | $ | 567 | | Equity securities with readily determinable fair values(a) | | $ | 2,759 | | | $ | 5,365 | |
Available-for-sale debt securities | Available-for-sale debt securities | | 14,025 | | | 9,709 | | Available-for-sale debt securities | | 17,337 | | | 22,014 | |
Held-to-maturity debt securities | Held-to-maturity debt securities | | 3,019 | | | 161 | | Held-to-maturity debt securities | | 1,331 | | | 1,746 | |
Total Short-term investments | Total Short-term investments | | $ | 19,328 | | | $ | 10,437 | | Total Short-term investments | | $ | 21,427 | | | $ | 29,125 | |
| Long-term investments | Long-term investments | | Long-term investments | |
Equity securities with readily determinable fair values | Equity securities with readily determinable fair values | | $ | 3,736 | | | $ | 2,809 | | Equity securities with readily determinable fair values | | $ | 3,486 | | | $ | 3,876 | |
| Available-for-sale debt securities | Available-for-sale debt securities | | 63 | | | 128 | | Available-for-sale debt securities | | 569 | | | 521 | |
Held-to-maturity debt securities | Held-to-maturity debt securities | | 35 | | | 37 | | Held-to-maturity debt securities | | 41 | | | 34 | |
Private equity securities at cost(b) | Private equity securities at cost(b) | | 500 | | | 432 | | Private equity securities at cost(b) | | 647 | | | 623 | |
Total Long-term investments | Total Long-term investments | | $ | 4,334 | | | $ | 3,406 | | Total Long-term investments | | $ | 4,742 | | | $ | 5,054 | |
Equity-method investments | Equity-method investments | | 16,608 | | | 16,856 | | Equity-method investments | | 15,995 | | | 16,472 | |
Total long-term investments and equity-method investments | Total long-term investments and equity-method investments | | $ | 20,942 | | | $ | 20,262 | | Total long-term investments and equity-method investments | | $ | 20,737 | | | $ | 21,526 | |
Held-to-maturity cash equivalents | Held-to-maturity cash equivalents | | $ | 567 | | | $ | 89 | | Held-to-maturity cash equivalents | | $ | 458 | | | $ | 268 | |
(a)As of July 4, 2021April 3, 2022 and December 31, 2020,2021, includes money market funds primarily invested in U.S. Treasury and government debt.
(b)Represent investments in the life sciences sector.
Debt Securities
| At July 4, 2021, our debt investment portfolio consisted of debt securities issued across diverse governments, corporate and financial institutions, which are investment-grade. The contractual or estimated maturities, are as follows: | |
At April 3, 2022, our investment portfolio consisted of debt securities issued across diverse governments, corporate and financial institutions, which are investment-grade. The contractual or estimated maturities, are as follows: | | At April 3, 2022, our investment portfolio consisted of debt securities issued across diverse governments, corporate and financial institutions, which are investment-grade. The contractual or estimated maturities, are as follows: |
| | July 4, 2021 | | December 31, 2020 | | April 3, 2022 | | December 31, 2021 |
| | | Gross Unrealized | | Maturities (in Years) | | | Gross Unrealized | | | | Gross Unrealized | | Maturities (in Years) | | | Gross Unrealized | |
(MILLIONS) | (MILLIONS) | | Amortized Cost | | Gains | | Losses | | Fair Value | | Within 1 | | Over 1 to 5 | | Over 5 | | | Amortized Cost | | Gains | | Losses | | Fair Value | (MILLIONS) | | Amortized Cost | | Gains | | Losses | | Fair Value | | Within 1 | | Over 1 to 5 | | Over 5 | | | Amortized Cost | | Gains | | Losses | | Fair Value |
Available-for-sale debt securities | Available-for-sale debt securities | | | | | | | | | | | | | | | | | | | | | | | Available-for-sale debt securities | | | | | | | | | | | | | | | | | | | | | | |
Government and agency––non-U.S. | Government and agency––non-U.S. | | $ | 12,371 | | | $ | 122 | | | $ | (35) | | | $ | 12,457 | | | $ | 12,448 | | | $ | 9 | | | $ | 0 | | | $ | 7,593 | | | $ | 136 | | | $ | (4) | | | $ | 7,725 | | Government and agency––non-U.S. | | $ | 15,217 | | | $ | 8 | | | $ | (158) | | | $ | 15,067 | | | $ | 14,548 | | | $ | 519 | | | $ | — | | | $ | 18,032 | | | $ | 13 | | | $ | (263) | | | $ | 17,783 | |
Government and agency––U.S. | Government and agency––U.S. | | 314 | | | 0 | | | (1) | | | 314 | | | 260 | | | 54 | | | 0 | | | 1,104 | | | 0 | | | (1) | | | 1,103 | | Government and agency––U.S. | | 1,832 | | | — | | | (1) | | | 1,831 | | | 1,830 | | | 1 | | | — | | | 4,056 | | | — | | | (1) | | | 4,055 | |
Corporate and other | Corporate and other | | 1,312 | | | 5 | | | 0 | | | 1,317 | | | 1,317 | | | 0 | | | 0 | | | 1,006 | | | 2 | | | 0 | | | 1,008 | | Corporate and other | | 1,009 | | | — | | | (1) | | | 1,008 | | | 958 | | | 49 | | | — | | | 698 | | | — | | | (1) | | | 697 | |
Held-to-maturity debt securities | Held-to-maturity debt securities | | Held-to-maturity debt securities | |
Time deposits and other | Time deposits and other | | 914 | | | 0 | | | 0 | | | 914 | | | 884 | | | 19 | | | 11 | | | 283 | | | 0 | | | 0 | | | 283 | | Time deposits and other | | 1,015 | | | — | | | — | | | 1,015 | | | 979 | | | 25 | | | 11 | | | 947 | | | — | | | — | | | 947 | |
Government and agency––non-U.S. | Government and agency––non-U.S. | | 2,706 | | | 0 | | | 0 | | | 2,706 | | | 2,701 | | | 4 | | | 1 | | | 5 | | | 0 | | | 0 | | | 5 | | Government and agency––non-U.S. | | 814 | | | — | | | — | | | 814 | | | 809 | | | 4 | | | 1 | | | 1,102 | | | — | | | — | | | 1,102 | |
Total debt securities | Total debt securities | | $ | 17,618 | | | $ | 126 | | | $ | (36) | | | $ | 17,709 | | | $ | 17,611 | | | $ | 86 | | | $ | 12 | | | $ | 9,991 | | | $ | 138 | | | $ | (5) | | | $ | 10,124 | | Total debt securities | | $ | 19,887 | | | $ | 8 | | | $ | (160) | | | $ | 19,735 | | | $ | 19,125 | | | $ | 598 | | | $ | 12 | | | $ | 24,835 | | | $ | 14 | | | $ | (265) | | | $ | 24,584 | |
Any expected credit losses to these portfolios would be immaterial to our financial statements.
PFIZER INC. AND SUBSIDIARY COMPANIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Equity Securities
| The following presents the calculation of the portion of unrealized (gains)/losses that relates to equity securities, excluding equity-method investments, held at the reporting date: | The following presents the calculation of the portion of unrealized (gains)/losses that relates to equity securities, excluding equity-method investments, held at the reporting date: | The following presents the calculation of the portion of unrealized (gains)/losses that relates to equity securities, excluding equity-method investments, held at the reporting date: |
| | Three Months Ended | | Six Months Ended | | | Three Months Ended |
(MILLIONS) | (MILLIONS) | | July 4, 2021 | | June 28, 2020 | | July 4, 2021 | | June 28, 2020 | (MILLIONS) | | | April 3, 2022 | | April 4, 2021 |
Net (gains)/losses recognized during the period on equity securities(a) | | (800) | | | $ | (732) | | | (1,200) | | | $ | (478) | | |
Net (gains)/losses recognized during the period on equity securities(a) | | Net (gains)/losses recognized during the period on equity securities(a) | | | $ | 699 | | | $ | (401) | |
Less: Net (gains)/losses recognized during the period on equity securities sold during the period | Less: Net (gains)/losses recognized during the period on equity securities sold during the period | | 24 | | | 1 | | | (5) | | | (18) | | Less: Net (gains)/losses recognized during the period on equity securities sold during the period | | | (11) | | | (28) | |
Net unrealized (gains)/losses during the reporting period on equity securities still held at the reporting date(b) | Net unrealized (gains)/losses during the reporting period on equity securities still held at the reporting date(b) | | $ | (823) | | | $ | (733) | | | $ | (1,196) | | | $ | (459) | | Net unrealized (gains)/losses during the reporting period on equity securities still held at the reporting date(b) | | | $ | 710 | | | $ | (372) | |
(a)Reported in Other (income)/deductions––net. See Note 4.
(b)Included in net unrealized gains(gains)/losses are observable price changes on equity securities without readily determinable fair values. As of July 4, 2021,April 3, 2022, there were cumulative impairments and downward adjustments of $93$110 million and upward adjustments of $98$167 million. Impairments, downward and upward adjustments were not significant in the secondfirst quarters of 2022 and first six months of 2021 and 2020.2021.
C. Short-Term Borrowings
| Short-term borrowings include: | Short-term borrowings include: | Short-term borrowings include: |
(MILLIONS) | (MILLIONS) | | July 4, 2021 | | December 31, 2020 | (MILLIONS) | | April 3, 2022 | | December 31, 2021 |
Commercial paper | | $ | 100 | | | $ | 556 | | |
| Current portion of long-term debt, principal amount | Current portion of long-term debt, principal amount | | 3,689 | | | 2,004 | | Current portion of long-term debt, principal amount | | $ | 251 | | | $ | 1,636 | |
Other short-term borrowings, principal amount(a) | Other short-term borrowings, principal amount(a) | | 101 | | | 145 | | Other short-term borrowings, principal amount(a) | | 385 | | | 605 | |
Total short-term borrowings, principal amount | Total short-term borrowings, principal amount | | 3,890 | | | 2,705 | | Total short-term borrowings, principal amount | | 636 | | | 2,241 | |
Net fair value adjustments related to hedging and purchase accounting | | Net fair value adjustments related to hedging and purchase accounting | | 9 | | | — | |
| Net unamortized discounts, premiums and debt issuance costs | | (2) | | | (2) | | |
Total Short-term borrowings, including current portion of long-term debt, carried at historical proceeds, as adjusted | Total Short-term borrowings, including current portion of long-term debt, carried at historical proceeds, as adjusted | | $ | 3,888 | | | $ | 2,703 | | Total Short-term borrowings, including current portion of long-term debt, carried at historical proceeds, as adjusted | | $ | 645 | | | $ | 2,241 | |
(a)IncludesPrimarily includes cash collateral. See Note 7F.
D. Long-Term Debt
| The following summarizes the aggregate principal amount of our senior unsecured long-term debt, and adjustments to report our aggregate long-term debt: | The following summarizes the aggregate principal amount of our senior unsecured long-term debt, and adjustments to report our aggregate long-term debt: | The following summarizes the aggregate principal amount of our senior unsecured long-term debt, and adjustments to report our aggregate long-term debt: |
(MILLIONS) | (MILLIONS) | | July 4, 2021 | | December 31, 2020 | (MILLIONS) | | April 3, 2022 | | December 31, 2021 |
Total long-term debt, principal amount | Total long-term debt, principal amount | | $ | 34,038 | | | $ | 35,774 | | Total long-term debt, principal amount | | $ | 34,603 | | | $ | 34,948 | |
Net fair value adjustments related to hedging and purchase accounting | Net fair value adjustments related to hedging and purchase accounting | | 1,507 | | | 1,562 | | Net fair value adjustments related to hedging and purchase accounting | | 1,240 | | | 1,438 | |
Net unamortized discounts, premiums and debt issuance costs | Net unamortized discounts, premiums and debt issuance costs | | (196) | | | (207) | | Net unamortized discounts, premiums and debt issuance costs | | (190) | | | (195) | |
Other long-term debt | Other long-term debt | | 5 | | | 4 | | Other long-term debt | | 3 | | | 4 | |
Total long-term debt, carried at historical proceeds, as adjusted | Total long-term debt, carried at historical proceeds, as adjusted | | $ | 35,354 | | | $ | 37,133 | | Total long-term debt, carried at historical proceeds, as adjusted | | $ | 35,656 | | | $ | 36,195 | |
Current portion of long-term debt, carried at historical proceeds, as adjusted (not included above) | Current portion of long-term debt, carried at historical proceeds, as adjusted (not included above) | | $ | 3,687 | | | $ | 2,002 | | Current portion of long-term debt, carried at historical proceeds, as adjusted (not included above) | | $ | 260 | | | $ | 1,636 | |
E. Derivative Financial Instruments and Hedging Activities
Foreign Exchange Risk
Risk––
A significant portion of our revenues, earnings and net investments in foreign affiliates is exposed to changes in foreign exchange rates. WeWhere foreign exchange risk is not offset by other exposures, we manage our foreign exchange risk principally through the use of derivative financial instruments and foreign currency debt. These financial instruments serve to mitigate the impact on net income as a result of remeasurement into another currency, or against the impact of translation into U.S. dollars of certain foreign exchange-denominated transactions.
The derivative financial instruments primarily hedge or offset exposures in the euro, U.K. pound, Japanese yen and Canadian dollar. We hedgedollar, and include a portion of our forecasted foreign exchange-denominated intercompany inventory sales denominated in euro, Japanese yen, Canadian dollar, Chinese renminbi, U.K. pound and Australian dollar forhedged up to two years. We may seek to protect against possible declines in the reported net investments of our foreign business entities.
PFIZER INC. AND SUBSIDIARY COMPANIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Interest Rate Risk
Risk––Our interest-bearing investments and borrowings are subject to interest rate risk. Depending on market conditions, we may change the profile of our outstanding debt or investments by entering into derivative financial instruments like interest rate swaps, either to hedge or offset the exposure to changes in the fair value of hedged items with fixed interest rates, or to convert variable rate debt or investments to fixed rates. The derivative financial instruments primarily hedge U.S. dollar fixed-rate debt.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
The following summarizes the fair value of the derivative financial instruments and notional amounts (including those reported as part of discontinued operations): |
| | July 4, 2021 | | December 31, 2020 |
| | | | Fair Value | | | | Fair Value |
(MILLIONS) | | Notional | | Asset | | Liability | | Notional | | Asset | | Liability |
Derivatives designated as hedging instruments: | | | | | | | | | | | | |
Foreign exchange contracts(a) | | $ | 24,630 | | | $ | 340 | | | $ | 846 | | | $ | 24,369 | | | $ | 145 | | | $ | 1,005 | |
Interest rate contracts | | 1,000 | | | 24 | | | 0 | | | 1,950 | | | 135 | | | 0 | |
| | | | 364 | | | 846 | | | | | 280 | | | 1,005 | |
| | | | | | | | | | | | |
Derivatives not designated as hedging instruments: | | | | | | | | | | | | |
Foreign exchange contracts | | $ | 17,085 | | | 91 | | | 113 | | | $ | 15,063 | | | 94 | | | 95 | |
| | | | | | | | | | | | |
Total | | | | $ | 455 | | | $ | 959 | | | | | $ | 373 | | | $ | 1,100 | |
(a)The notional amount of outstanding foreign exchange contracts hedging our intercompany forecasted inventory sales was $4.9 billion as of July 4, 2021 and $5.0 billion as of December 31, 2020.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
The following summarizes information about the gains/(losses) incurred to hedge or offset operational foreign exchange or interest rate risk exposures (including those reported as part of discontinued operations): |
| | Gains/(Losses) Recognized in OID(a) | | Gains/(Losses) Recognized in OCI(a) | | Gains/(Losses) Reclassified from OCI into OID and COS(a) |
| | Three Months Ended |
(MILLIONS) | | July 4, 2021 | | June 28, 2020 | | July 4, 2021 | | June 28, 2020 | | July 4, 2021 | | June 28, 2020 |
Derivative Financial Instruments in Cash Flow Hedge Relationships: | | | | | | | | | | | | |
Foreign exchange contracts(b) | | $ | — | | | $ | — | | | $ | (258) | | | $ | 187 | | | $ | 13 | | | $ | 172 | |
Amount excluded from effectiveness testing and amortized into earnings(c) | | — | | | — | | | 9 | | | 13 | | | 8 | | | 14 | |
Derivative Financial Instruments in Fair Value Hedge Relationships: | | | | | | | | | | | | |
Interest rate contracts | | 26 | | | 6 | | | — | | | — | | | — | | | — | |
Hedged item | | (26) | | | (6) | | | — | | | — | | | — | | | — | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
Derivative Financial Instruments in Net Investment Hedge Relationships: | | | | | | | | | | | | |
Foreign exchange contracts | | — | | | — | | | 1 | | | (144) | | | 0 | | | 0 | |
The portion of foreign exchange contracts excluded from the assessment of hedge effectiveness(c) | | — | | | — | | | 36 | | | 29 | | | 26 | | | 42 | |
Non-Derivative Financial Instruments in Net Investment Hedge Relationships:(d) | | | | | | | | | | | | |
Foreign currency short-term borrowings | | — | | | — | | | (11) | | | 0 | | | 0 | | | 0 | |
Foreign currency long-term debt | | — | | | — | | | (8) | | | (42) | | | 0 | | | 0 | |
Derivative Financial Instruments Not Designated as Hedges: | | | | | | | | | | | | |
Foreign exchange contracts | | (65) | | | 8 | | | — | | | — | | | — | | | — | |
All other net(c) | | — | | | — | | | 0 | | | 12 | | | 0 | | | 0 | |
| | $ | (65) | | | $ | 8 | | | $ | (230) | | | $ | 56 | | | $ | 47 | | | $ | 228 | |
| | | | | | | | | | | | |
PFIZER INC. AND SUBSIDIARY COMPANIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | |
| | Gains/(Losses) Recognized in OID(a) | | Gains/(Losses) Recognized in OCI(a) | | Gains/(Losses) Reclassified from OCI into OID and COS(a) |
| | Six Months Ended |
(MILLIONS) | | July 4, 2021 | | June 28, 2020 | | July 4, 2021 | | June 28, 2020 | | July 4, 2021 | | June 28, 2020 |
Derivative Financial Instruments in Cash Flow Hedge Relationships: | | | | | | | | | | | | |
Foreign exchange contracts(b) | | $ | — | | | $ | — | | | $ | (56) | | | $ | (341) | | | $ | (255) | | | $ | 126 | |
Amount excluded from effectiveness testing and amortized into earnings(c) | | — | | | — | | | 21 | | | 42 | | | 18 | | | 41 | |
Derivative Financial Instruments in Fair Value Hedge Relationships: | | | | | | | | | | | | |
Interest rate contracts | | (1) | | | 392 | | | — | | | — | | | — | | | — | |
Hedged item | | 1 | | | (392) | | | — | | | — | | | — | | | — | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
Derivative Financial Instruments in Net Investment Hedge Relationships: | | | | | | | | | | | | |
Foreign exchange contracts | | — | | | — | | | 155 | | | 240 | | | 0 | | | 0 | |
The portion of foreign exchange contracts excluded from the assessment of hedge effectiveness(c) | | — | | | — | | | 35 | | | 176 | | | 55 | | | 84 | |
Non-Derivative Financial Instruments in Net Investment Hedge Relationships:(d) | | | | | | | | | | | | |
Foreign currency short-term borrowings | | — | | | — | | | 27 | | | 8 | | | 0 | | | 0 | |
Foreign currency long-term debt | | — | | | — | | | 48 | | | 3 | | | 0 | | | 0 | |
Derivative Financial Instruments Not Designated as Hedges: | | | | | | | | | | | | |
Foreign exchange contracts | | (23) | | | (51) | | | — | | | — | | | — | | | — | |
All other net(c) | | — | | | — | | | 0 | | | 12 | | | 0 | | | (1) | |
| | $ | (23) | | | $ | (51) | | | $ | 230 | | | $ | 139 | | | $ | (182) | | | $ | 251 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
The following summarizes the fair value of the derivative financial instruments and notional amounts (including those reported as part of discontinued operations): |
| | April 3, 2022 | | December 31, 2021 |
| | | | Fair Value | | | | Fair Value |
(MILLIONS) | | Notional | | Asset | | Liability | | Notional | | Asset | | Liability |
Derivatives designated as hedging instruments: | | | | | | | | | | | | |
Foreign exchange contracts(a) | | $ | 29,833 | | | $ | 899 | | | $ | 647 | | | $ | 29,576 | | | $ | 787 | | | $ | 717 | |
Interest rate contracts | | 2,250 | | | 5 | | | 140 | | | 2,250 | | | 21 | | | — | |
| | | | 904 | | | 787 | | | | | 808 | | | 717 | |
Derivatives not designated as hedging instruments: | | | | | | | | | | | | |
Foreign exchange contracts | | $ | 22,009 | | | 200 | | | 143 | | | $ | 21,419 | | | 160 | | | 164 | |
Total | | | | $ | 1,104 | | | $ | 930 | | | | | $ | 968 | | | $ | 881 | |
(a)The notional amount of outstanding foreign exchange contracts hedging our intercompany forecasted inventory sales was $4.7 billion as of April 3, 2022 and $4.8 billion as of December 31, 2021.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
The following summarizes information about the gains/(losses) incurred to hedge or offset operational foreign exchange or interest rate risk exposures (including those reported as part of discontinued operations): |
| | Gains/(Losses) Recognized in OID(a) | | Gains/(Losses) Recognized in OCI(a) | | Gains/(Losses) Reclassified from OCI into OID and COS(a) |
| | Three Months Ended |
(MILLIONS) | | April 3, 2022 | | April. 4, 2021 | | April 3, 2022 | | April. 4, 2021 | | April 3, 2022 | | April. 4, 2021 |
Derivative Financial Instruments in Cash Flow Hedge Relationships: | | | | | | | | | | | | |
Foreign exchange contracts(b) | | $ | — | | | $ | — | | | $ | 187 | | | $ | 202 | | | $ | 195 | | | $ | (268) | |
Amount excluded from effectiveness testing and amortized into earnings(c) | | — | | | — | | | 16 | | | 12 | | | 18 | | | 9 | |
Derivative Financial Instruments in Fair Value Hedge Relationships: | | | | | | | | | | | | |
Interest rate contracts | | (156) | | | (26) | | | — | | | — | | | — | | | — | |
Hedged item | | 156 | | | 26 | | | — | | | — | | | — | | | — | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
Derivative Financial Instruments in Net Investment Hedge Relationships: | | | | | | | | | | | | |
Foreign exchange contracts | | — | | | — | | | 259 | | | 154 | | | — | | | — | |
Amount excluded from effectiveness testing and amortized into earnings(c) | | — | | | — | | | (74) | | | (1) | | | 30 | | | 29 | |
Non-Derivative Financial Instruments in Net Investment Hedge Relationships:(d) | | | | | | | | | | | | |
Foreign currency short-term borrowings | | — | | | — | | | 26 | | | 38 | | | — | | | — | |
Foreign currency long-term debt | | — | | | — | | | 23 | | | 56 | | | — | | | — | |
Derivative Financial Instruments Not Designated as Hedges: | | | | | | | | | | | | |
Foreign exchange contracts | | (19) | | | 42 | | | — | | | — | | | — | | | — | |
| | | | | | | | | | | | |
| | $ | (19) | | | $ | 42 | | | $ | 436 | | | $ | 460 | | | $ | 243 | | | $ | (230) | |
| | | | | | |
| | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
(a)OID = Other (income)/deductions—net, included in Other (income)/deductions—net in the condensed consolidated statements of income. COS = Cost of Sales, included in Cost of sales in the condensed consolidated statements of income. OCI = Other comprehensive income/(loss), included in the condensed consolidated statements of comprehensive income.
(b)The amounts reclassified from OCI into COS were:
•a net lossgain of $31$34 million in the secondfirst quarter of 2021;2022; and
•a net loss of $76$45 million in the first six months of 2021;
•a net gain of $80 million in the second quarter of 2020; and
•a net gain of $150 million in the first six months of 2020.2021.
The remaining amounts were reclassified from OCI into OID. Based on quarter-end foreign exchange rates that are subject to change, we expect to reclassify a pre-tax lossgain of $128$332 million within the next 12 months into income. The maximum length of time over which we are hedging our exposure to the variability in future foreign exchange cash flows is approximately 2221 years and relates to foreign currency debt.
(c)The amounts reclassified from OCI were reclassified into OID.
(d)Short-term borrowings and long-term debt include foreign currency borrowings which are used in net investment hedges. The short-term borrowingsborrowings’ carrying value as of July 4,December 31, 2021 was $1.2$1.1 billion. The long-term debt carrying values as of July 4, 2021April 3, 2022 and December 31, 20202021 were $881$821 million and $2.1 billion,$844 million, respectively.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
The following summarizes cumulative basis adjustments for fair value hedges to our long-term debt: |
| | July 4, 2021 | | December 31, 2020 |
| | | | Cumulative Amount of Fair Value Hedging Adjustment Increase/(Decrease) to Carrying Amount | | | | Cumulative Amount of Fair Value Hedging Adjustment Increase/(Decrease) to Carrying Amount |
(MILLIONS) | | Carrying Amount of Hedged Assets/Liabilities(a) | | Active Hedging Relationships | | Discontinued Hedging Relationships | | Carrying Amount of Hedged Assets/Liabilities(a) | | Active Hedging Relationships | | Discontinued Hedging Relationships |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | |
Long-term debt | | $ | 993 | | | $ | 23 | | | $ | 1,202 | | | $ | 2,016 | | | $ | 117 | | | $ | 1,149 | |
(a)Carrying amounts exclude the cumulative amount of fair value hedging adjustments.
PFIZER INC. AND SUBSIDIARY COMPANIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
The following summarizes cumulative basis adjustments to our debt in fair value hedges: |
| | April 3, 2022 | | December 31, 2021 |
| | | | Cumulative Amount of Fair Value Hedging Adjustment Increase/(Decrease) to Carrying Amount | | | | Cumulative Amount of Fair Value Hedging Adjustment Increase/(Decrease) to Carrying Amount |
(MILLIONS) | | Carrying Amount of Hedged Assets/Liabilities(a) | | Active Hedging Relationships | | Discontinued Hedging Relationships | | Carrying Amount of Hedged Assets/Liabilities(a) | | Active Hedging Relationships | | Discontinued Hedging Relationships |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
Short-term borrowings, including current portion of long-term debt | | $ | — | | | $ | — | | | $ | 4 | | | $ | — | | | $ | — | | | $ | — | |
| | | | |
Long-term debt | | $ | 2,234 | | | $ | (140) | | | $ | 1,124 | | | $ | 2,233 | | | $ | 16 | | | $ | 1,154 | |
(a)Carrying amounts exclude the cumulative amount of fair value hedging adjustments.
F. Credit Risk
A significant portion of our trade accounts receivable balances are due from drug wholesalers.wholesalers and governments. For additional information on our trade accounts receivables with significant customers, see Note 13B13C below and Note 17B17C in our 20202021 Form 10-K.
As of July 4, 2021,April 3, 2022, the largest investment exposures in our portfolio represent primarily sovereign debt instruments issued by Canada, Japan, U.S., France, Germany, U.K., Canada, France, Denmark, AustraliaSwitzerland, Austria and the Netherlands.
With respect to our derivative financial instrument agreements with financial institutions, we do not expect to incur a significant loss from failure of any counterparty. Derivative financial instruments are executed under International Swaps and Derivatives Association (ISDA) master agreements with credit-support annexes that contain zero threshold provisions requiring collateral to be exchanged daily depending on levels of exposure. As a result, there are no significant concentrations of credit risk with any individual financial institution. As of July 4, 2021,April 3, 2022, the aggregate fair value of these derivative financial instruments that are in a net payable position was $618$568 million, for which we have posted collateral of $716$526 million with a corresponding amount reported in Short-term investments. As of July 4, 2021,April 3, 2022, the aggregate fair value of our derivative financial instruments that are in a net receivable position was $35$532 million, for which we have received collateral of $25$341 million with a corresponding amount reported in Short-term borrowings, including current portion of long-term debt.
Note 8. Other Financial Information
A. Inventories
| The following summarizes the components of Inventories: | The following summarizes the components of Inventories: | The following summarizes the components of Inventories: |
(MILLIONS) | (MILLIONS) | | July 4, 2021 | | December 31, 2020 | (MILLIONS) | | April 3, 2022 | | December 31, 2021 |
Finished goods | Finished goods | | $ | 3,702 | | | $ | 2,878 | | Finished goods | | $ | 3,633 | | | $ | 3,641 | |
Work-in-process | Work-in-process | | 4,388 | | | 4,430 | | Work-in-process | | 4,843 | | | 4,424 | |
Raw materials and supplies | Raw materials and supplies | | 859 | | | 738 | | Raw materials and supplies | | 1,502 | | | 994 | |
Inventories(a) | Inventories(a) | | $ | 8,948 | | | $ | 8,046 | | Inventories(a) | | $ | 9,979 | | | $ | 9,059 | |
Noncurrent inventories not included above(b) | Noncurrent inventories not included above(b) | | $ | 981 | | | $ | 890 | | Noncurrent inventories not included above(b) | | $ | 894 | | | $ | 939 | |
(a)The change from December 31, 2020 primarily2021 reflects increases for Paxlovid and Comirnaty, as well as increases for certain products including inventory buildmainly for new product launches (primarily BNT162b2),network strategy and supply recovery, and foreign exchange, partially offset by decreases due to market demand and network strategy.demand.
(b)Included in Other noncurrent assets. There are no recoverability issues for these amounts.
B. Other Current Liabilities
Other current liabilities includes, among other things, amounts payable to BioNTech for the gross profit split for BNT162b2,Comirnaty, which totaled $4.5$10.0 billion as of July 4, 2021April 3, 2022 and $25 million$9.7 billion as of December 31, 2020.2021.
PFIZER INC. AND SUBSIDIARY COMPANIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Note 9. Identifiable Intangible Assets
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
The following summarizes the components of Identifiable intangible assets: |
| | July 4, 2021 | | December 31, 2020 |
(MILLIONS) | | Gross Carrying Amount | | Accumulated Amortization | | Identifiable Intangible Assets, less Accumulated Amortization | | Gross Carrying Amount | | Accumulated Amortization | | Identifiable Intangible Assets, less Accumulated Amortization |
Finite-lived intangible assets | | | | | | | | | | | | |
Developed technology rights(a) | | $ | 74,370 | | | $ | (52,754) | | | $ | 21,616 | | | $ | 73,545 | | | $ | (50,902) | | | $ | 22,643 | |
Brands | | 922 | | | (791) | | | 131 | | | 922 | | | (774) | | | 148 | |
Licensing agreements and other | | 2,290 | | | (1,248) | | | 1,042 | | | 2,292 | | | (1,186) | | | 1,106 | |
| | | | | | | | | | | | |
| | 77,582 | | | (54,793) | | | 22,789 | | | 76,759 | | | (52,862) | | | 23,896 | |
Indefinite-lived intangible assets | | | | | | | | | | | | |
Brands | | 827 | | | | | 827 | | | 827 | | | | | 827 | |
IPR&D | | 3,134 | | | | | 3,134 | | | 3,175 | | | | | 3,175 | |
Licensing agreements and other | | 573 | | | | | 573 | | | 573 | | | | | 573 | |
| | 4,535 | | | | | 4,535 | | | 4,575 | | | | | 4,575 | |
Identifiable intangible assets(b) | | $ | 82,116 | | | $ | (54,793) | | | $ | 27,323 | | | $ | 81,334 | | | $ | (52,862) | | | $ | 28,471 | |
A. Identifiable Intangible Assets | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
The following summarizes the components of Identifiable intangible assets: |
| | April 3, 2022 | | December 31, 2021 |
(MILLIONS) | | Gross Carrying Amount | | Accumulated Amortization | | Identifiable Intangible Assets, less Accumulated Amortization | | Gross Carrying Amount | | Accumulated Amortization | | Identifiable Intangible Assets, less Accumulated Amortization |
Finite-lived intangible assets | | | | | | | | | | | | |
Developed technology rights | | $ | 73,212 | | | $ | (54,397) | | | $ | 18,815 | | | $ | 73,346 | | | $ | (53,732) | | | $ | 19,614 | |
Brands | | 922 | | | (816) | | | 106 | | | 922 | | | (807) | | | 115 | |
Licensing agreements and other | | 2,302 | | | (1,329) | | | 973 | | | 2,284 | | | (1,299) | | | 985 | |
| | | | | | | | | | | | |
| | 76,436 | | | (56,542) | | | 19,894 | | | 76,552 | | | (55,838) | | | 20,714 | |
Indefinite-lived intangible assets | | | | | | | | | | | | |
Brands | | 827 | | | | | 827 | | | 827 | | | | | 827 | |
IPR&D(a) | | 8,122 | | | | | 8,122 | | | 3,092 | | | | | 3,092 | |
Licensing agreements and other(a) | | 973 | | | | | 973 | | | 513 | | | | | 513 | |
| | 9,922 | | | | | 9,922 | | | 4,432 | | | | | 4,432 | |
Identifiable intangible assets(a), (b) | | $ | 86,358 | | | $ | (56,542) | | | $ | 29,816 | | | $ | 80,984 | | | $ | (55,838) | | | $ | 25,146 | |
(a)The increase in the gross carrying amount primarily reflects $500 millionamounts mainly reflect the impact of capitalized BNT162b2 sales milestones to BioNTech.the acquisition of Arena. See Note 2A.
(b)The decreaseincrease is primarily due to amortization,the acquisition of Arena, partially offset by the capitalization of the BNT162b2 milestones described above.amortization expense.
PFIZER INC. AND SUBSIDIARY COMPANIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)B. Goodwill
| | | | | | | | | | | | | | | | |
The following summarizes the changes in the carrying amount of Goodwill: |
(MILLIONS) | | | | | | | | | | Total(a) |
Balance, January 1, 2022 | | | | | | | | | | $ | 49,208 | |
Additions(b) | | | | | | | | | | 1,023 | |
Other(c) | | | | | | | | | | (21) | |
Balance, April 3, 2022 | | | | | | | | | | $ | 50,211 | |
(a)All goodwill is assigned within the Biopharma reportable segment.
Amortization(b)Additions relate to our acquisition of Arena. See Note 2A.
Total amortization(c)Other represents the impact of finite-lived intangible assets was $942 million for the second quarter of 2021 and $880 million for the second quarter of 2020, and $1.8 billion for the first six months of 2021 and $1.7 billion for the first six months of 2020.foreign exchange.
Note 10. Pension and Postretirement Benefit Plans
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
The following summarizes the components of net periodic benefit cost/(credit): | | | | | | |
| | Pension Plans | | | | | | | | |
| | U.S. | | International | | Postretirement Plans | | | | | | |
| | Three Months Ended | | | | | | |
(MILLIONS) | | April 3, 2022 | | April. 4, 2021 | | April 3, 2022 | | April. 4, 2021 | | April 3, 2022 | | April. 4, 2021 | | | | | | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
| | | | | | |
| | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | |
| | | | | | | | | | | | | | | | | | |
Service cost | | $ | — | | | $ | — | | | $ | 30 | | | $ | 33 | | | $ | 7 | | | $ | 9 | | | | | | | |
Interest cost | | 118 | | | 113 | | | 42 | | | 36 | | | 7 | | | 7 | | | | | | | |
Expected return on plan assets | | (245) | | | (261) | | | (79) | | | (82) | | | (12) | | | (10) | | | | | | | |
Amortization of prior service credits | | — | | | (1) | | | — | | | — | | | (36) | | | (39) | | | | | | | |
Actuarial (gains)/losses(a) | | (65) | | | (47) | | | — | | | — | | | — | | | — | | | | | | | |
Curtailments | | — | | | — | | | — | | | — | | | (13) | | | — | | | | | | | |
Special termination benefits | | 6 | | | 7 | | | — | | | — | | | — | | | 1 | | | | | | | |
Net periodic benefit cost/(credit) reported in income | | $ | (186) | | | $ | (187) | | | $ | (8) | | | $ | (12) | | | $ | (46) | | | $ | (32) | | | | | | | |
As discussed(a)Mainly reflects interim actuarial remeasurement gains in Note 1C, we adopted a change2022, primarily due to an increase in accounting principle to a more preferable policy under U.S. GAAP to immediately recognize actuarial gains and losses arising from the remeasurement of pension and postretirement plans. This change has been applied to all pension and postretirement plans on a retrospective basis for all prior periods presented.discount rate.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
The following summarizes the components of net periodic benefit cost/(credit), including in 2020 costs/(credits) reported as part of discontinued operations: |
| | |
| | Pension Plans | | |
| | U.S. | | International | | Postretirement Plans |
| | Three Months Ended |
(MILLIONS) | | July 4, 2021 | | June 28, 2020 | | July 4, 2021 | | June 28, 2020 | | July 4, 2021 | | June 28, 2020 |
Service cost | | $ | 0 | | | $ | 0 | | | $ | 33 | | | $ | 36 | | | $ | 9 | | | $ | 10 | |
Interest cost | | 114 | | | 138 | | | 37 | | | 40 | | | 7 | | | 13 | |
Expected return on plan assets | | (261) | | | (251) | | | (82) | | | (78) | | | (10) | | | (9) | |
Amortization of prior service credits | | 0 | | | (1) | | | 0 | | | (1) | | | (39) | | | (43) | |
| | | | | | | | | | | | |
Curtailments | | 0 | | | 0 | | | (1) | | | 0 | | | 0 | | | 0 | |
Actuarial (gains)/losses | | 2 | | | (6) | | | 0 | | | 0 | | | 0 | | | 0 | |
Special termination benefits | | 4 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | |
Net periodic benefit cost/(credit) reported in income | | $ | (142) | | | $ | (119) | | | $ | (14) | | | $ | (3) | | | $ | (32) | | | $ | (30) | |
| | Pension Plans | | |
| | U.S. | | International | | Postretirement Plans |
| | Six Months Ended |
(MILLIONS) | | July 4, 2021 | | June 28, 2020 | | July 4, 2021 | | June 28, 2020 | | July 4, 2021 | | June 28, 2020 |
Service cost | | $ | 0 | | | $ | 0 | | | $ | 66 | | | $ | 72 | | | $ | 18 | | | $ | 19 | |
Interest cost | | 227 | | | 280 | | | 73 | | | 82 | | | 14 | | | 25 | |
Expected return on plan assets | | (521) | | | (503) | | | (164) | | | (159) | | | (20) | | | (18) | |
Amortization of prior service credits | | (1) | | | (2) | | | (1) | | | (1) | | | (77) | | | (86) | |
| | | | | | | | | | | | |
Curtailments | | 0 | | | 0 | | | (1) | | | 0 | | | 0 | | | 0 | |
Actuarial (gains)/losses | | (45) | | | 158 | | | 0 | | | 3 | | | 0 | | | 0 | |
Special termination benefits | | 12 | | | 1 | | | 0 | | | 0 | | | 1 | | | 0 | |
Net periodic benefit cost/(credit) reported in income | | $ | (329) | | | $ | (66) | | | $ | (26) | | | $ | (4) | | | $ | (64) | | | $ | (59) | |
The components of net periodic benefit cost/(credit) other than the service cost component are primarily included in Other (income)/deductions––net (see Note 4).
For the six months ended July 4, 2021, we contributed $111 million, $217 million, and $31 million to our U.S. Pension Plans, International Pension Plans, and Postretirement Plans, respectively, from our general assets, which include direct employer benefit payments.
PFIZER INC. AND SUBSIDIARY COMPANIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
For the three months ended April 3, 2022, we contributed $112 million, $49 million, and $3 million to our U.S. Pension Plans, International Pension Plans, and Postretirement Plans, respectively, from our general assets, which include direct employer benefit payments.
Note 11. Earnings Per Common Share Attributable to Pfizer Inc. Common Shareholders
| The following presents the detailed calculation of EPS: | The following presents the detailed calculation of EPS: | The following presents the detailed calculation of EPS: |
| | | Three Months Ended | | Six Months Ended | | | | Three Months Ended |
(MILLIONS) | (MILLIONS) | | July 4, 2021 | | June 28, 2020 | | July 4, 2021 | | June 28, 2020 | (MILLIONS) | | | April 3, 2022 | | April 4, 2021 |
EPS Numerator––Basic | EPS Numerator––Basic | | | | | | | | | EPS Numerator––Basic | | | | | |
Income from continuing operations attributable to Pfizer Inc. | | $ | 5,539 | | | $ | 2,596 | | | $ | 10,408 | | | $ | 5,070 | | |
Less: Preferred stock dividends––net of tax | | 0 | | | 0 | | | 0 | | | 0 | | |
| Income from continuing operations attributable to Pfizer Inc. common shareholders | Income from continuing operations attributable to Pfizer Inc. common shareholders | | 5,539 | | | 2,596 | | | 10,408 | | | 5,070 | | Income from continuing operations attributable to Pfizer Inc. common shareholders | | | $ | 7,872 | | | $ | 4,876 | |
Income from discontinued operations––net of tax | | 24 | | | 893 | | | 32 | | | 1,774 | | |
Discontinued operations––net of tax | | Discontinued operations––net of tax | | | (9) | | | 1 | |
| Net income attributable to Pfizer Inc. common shareholders | Net income attributable to Pfizer Inc. common shareholders | | $ | 5,563 | | | $ | 3,489 | | | $ | 10,440 | | | $ | 6,843 | | Net income attributable to Pfizer Inc. common shareholders | | | $ | 7,864 | | | $ | 4,877 | |
EPS Numerator––Diluted | EPS Numerator––Diluted | | | | | | | | | EPS Numerator––Diluted | | | | | |
Income from continuing operations attributable to Pfizer Inc. common shareholders and assumed conversions | Income from continuing operations attributable to Pfizer Inc. common shareholders and assumed conversions | | $ | 5,539 | | | $ | 2,596 | | | $ | 10,408 | | | $ | 5,070 | | Income from continuing operations attributable to Pfizer Inc. common shareholders and assumed conversions | | | $ | 7,872 | | | $ | 4,876 | |
Income from discontinued operations––net of tax, attributable to Pfizer Inc. common shareholders and assumed conversions | | 24 | | | 893 | | | 32 | | | 1,774 | | |
Discontinued operations––net of tax, attributable to Pfizer Inc. common shareholders and assumed conversions | | Discontinued operations––net of tax, attributable to Pfizer Inc. common shareholders and assumed conversions | | | (9) | | | 1 | |
Net income attributable to Pfizer Inc. common shareholders and assumed conversions | Net income attributable to Pfizer Inc. common shareholders and assumed conversions | | $ | 5,563 | | | $ | 3,489 | | | $ | 10,440 | | | $ | 6,843 | | Net income attributable to Pfizer Inc. common shareholders and assumed conversions | | | $ | 7,864 | | | $ | 4,877 | |
EPS Denominator | EPS Denominator | | | | | | | | | EPS Denominator | | | | | |
Weighted-average number of common shares outstanding––Basic | Weighted-average number of common shares outstanding––Basic | | 5,598 | | | 5,554 | | | 5,591 | | | 5,550 | | Weighted-average number of common shares outstanding––Basic | | | 5,617 | | | 5,584 | |
Common-share equivalents: stock options, stock issuable under employee compensation plans, convertible preferred stock and accelerated share repurchase agreements | | 80 | | | 65 | | | 79 | | | 66 | | |
Common-share equivalents: stock options and stock issuable under employee compensation plans | | Common-share equivalents: stock options and stock issuable under employee compensation plans | | | 141 | | | 78 | |
Weighted-average number of common shares outstanding––Diluted | Weighted-average number of common shares outstanding––Diluted | | 5,678 | | | 5,619 | | | 5,670 | | | 5,616 | | Weighted-average number of common shares outstanding––Diluted | | | 5,758 | | | 5,662 | |
Anti-dilutive common stock equivalents(a) | Anti-dilutive common stock equivalents(a) | | 5 | | | 6 | | | 4 | | | 4 | | Anti-dilutive common stock equivalents(a) | | | — | | | 2 | |
(a)These common stock equivalents were outstanding for the periods presented, but were not included in the computation of diluted EPS for those periods because their inclusion would have had an anti-dilutive effect.
Note 12. Contingencies and Certain Commitments
We and certain of our subsidiaries are subject to numerous contingencies arising in the ordinary course of business, including tax and legal contingencies. The following outlines our legal contingencies. For a discussion of our tax contingencies, see Note 5B.
A. Legal Proceedings
Our legal contingencies include, but are not limited to, the following:
•Patent litigation, which typically involves challenges to the coverage and/or validity of patents on various products, processes or dosage forms. An adverse outcome could result in loss of patent protection for a product, a significant loss of revenues from a product or impairment of the value of associated assets. We are the plaintiff in the majority of these actions. An adverse outcome in actions in which we are the plaintiff could result in loss of patent protection for a drug, a significant loss of revenues from that drug or impairment of the value of associated assets.
•Product liability and other product-related litigation related to current or former products, which can include personal injury, consumer, off-label promotion, securities, antitrust and breach of contract claims, among others, and often involves highly complex issues relating to medical causation, label warnings and reliance on those warnings, scientific evidence and findings, actual, provable injury and other matters.
•Commercial and other asserted or unasserted matters, which can include acquisition-, licensing-, intellectual property-, collaboration- or co-promotion-related and product-pricing claims and environmental claims and proceedings, can involve complexities that will vary from matter to matter.
PFIZER INC. AND SUBSIDIARY COMPANIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
•Government investigations, which often are related to the extensive regulation of pharmaceutical companies by national, state and local government agencies in the U.S. and in other jurisdictions.
Certain of these contingencies could result in increased expenses and/or losses, including damages, royalty payments, fines and/or civil penalties, which could be substantial, and/or criminal charges.
We believe that our claims and defenses in matters in which we are a defendant are substantial, but litigation is inherently unpredictable and excessive verdicts do occur. We do not believe that any of these matters will have a material adverse effect on our financial position. However, we could incur judgments, enter into settlements or revise our expectations regarding the
PFIZER INC. AND SUBSIDIARY COMPANIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
outcome of matters, which could have a material adverse effect on our results of operations and/or our cash flows in the period in which the amounts are accrued or paid.
We have accrued for losses that are both probable and reasonably estimable. Substantially all of our contingencies are subject to significant uncertainties and, therefore, determining the likelihood of a loss and/or the measurement of any loss can be complex. Consequently, we are unable to estimate the range of reasonably possible loss in excess of amounts accrued. Our assessments, which result from a complex series of judgments about future events and uncertainties, are based on estimates and assumptions that have been deemed reasonable by management, but that may prove to be incomplete or inaccurate, and unanticipated events and circumstances may occur that might cause us to change those estimates and assumptions.
Amounts recorded for legal and environmental contingencies can result from a complex series of judgments about future events and uncertainties and can rely heavily on estimates and assumptions. For proceedings under environmental laws to which a governmental authority is a party, we have adopted a disclosure threshold of $1 million in potential or actual governmental monetary sanctions.
The principal pending matters to which we are a party are discussed below. In determining whether a pending matter is a principal matter, we consider both quantitative and qualitative factors to assess materiality, such as, among others, the amount of damages and the nature of other relief sought, if specified; our view of the merits of the claims and of the strength of our defenses; whether the action purports to be, or is, a class action and, if not certified, our view of the likelihood that a class will be certified by the court; the jurisdiction in which the proceeding is pending; whether related actions have been transferred to multidistrict litigation; any experience that we or, to our knowledge, other companies have had in similar proceedings; whether disclosure of the action would be important to a reader of our financial statements, including whether disclosure might change a reader’s judgment about our financial statements in light of all of the information that is available to the reader; the potential impact of the proceeding on our reputation; and the extent of public interest in the matter. In addition, with respect to patent matters in which we are the plaintiff, we consider, among other things, the financial significance of the product protected by the patent(s) at issue. Some of the matters discussed below include those which management believes that the likelihood of possible loss in excess of amounts accrued is remote.
A1. Legal Proceedings––Patent Litigation
We are involved in suits relating to our patents, including but not limited to, those discussed below. Most involve claims by generic drug manufacturers that patents covering our products (or those of our collaboration/licensing partners)partners to which we have licenses or co-promotion rights and to which we may or may not be a party), processes or dosage forms are invalid and/or do not cover the product of the generic drug manufacturer. Also, counterclaims, as well as various independent actions, have been filed alleging that our assertions of, or attempts to enforce, patent rights with respect to certain products constitute unfair competition and/or violations of antitrust laws. In addition to the challenges to the U.S. patents that are discussed below, patent rights to certain of our products or those of our collaboration/licensing partners are being challenged in various other jurisdictions. For example, someSome of our collaboration or licensing partners face challenges to the validity of their patent rights in non-U.S. jurisdictions. For example, in April 2022, the U.K. High Court issued a judgment finding invalid a BMS patent related to Eliquis due to expire in 2026. BMS will seek permission to appeal the High Court’s decision. Additional challenges remain pending in other jurisdictions. We are also party to patent damages suits in various jurisdictions pursuant to which generic drug manufacturers, payers, governments or other parties are seeking damages from us for allegedly causing delay of generic entry. Additionally, our licensing and collaboration partners face challenges by generic drug manufacturers to patents covering products for which we have licenses or co-promotion rights.
We also are often involved in other proceedings, such as inter partes review, post-grant review, re-examination or opposition proceedings, before the U.S. Patent and Trademark Office, the European Patent Office, or other foreign counterparts relating to our intellectual property or the intellectual property rights of others. Also, if one of our patents is found to be invalid by such proceedings, generic or competitive products could be introduced into the market resulting in the erosion of sales of our existing products. For example, several of the patents in our pneumococcal vaccine portfolio were challenged in inter partes review and post-grant review proceedings in the U.S. In 2017, the Patent Trial and Appeal Board (PTAB) initiated proceedings which remain pending, with respect to 2 of our pneumococcal vaccine patents. However, the PTAB declined to initiate proceedings as to two other pneumococcal vaccine patents; those 2 patents, and 1 other patent, are now beingwere challenged in federal court in Delaware. ChallengesIn September 2021, Pfizer and a challenger entered into a settlement and license agreement, resolving all worldwide legal proceedings involving that challenger, related to otherour pneumococcal vaccine patents. Other challenges to pneumococcal vaccine patents remain pending at the PTAB and outside the U.S. The invalidation of any of the patents in our pneumococcal portfolio could potentially allow a competitor’s vaccineadditional competitor vaccines into the marketplace. In the event
PFIZER INC. AND SUBSIDIARY COMPANIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
that any of the patents are found valid and infringed, a competitor’s vaccine might be prohibited from entering the market or a competitor might be required to pay us a royalty.
We are also subject to patent litigation pursuant to which one or more third parties seek damages and/or injunctive relief to compensate for alleged infringement of its patents by our commercial or other activities. For example, our Hospira subsidiaries
PFIZER INC. AND SUBSIDIARY COMPANIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
are involved in patent and patent-related disputes over their attempts to bring generic pharmaceutical and biosimilar products to market. If one of our marketed products is found to infringe valid patent rights of a third party, such third party may be awarded significant damages or royalty payments, or we may be prevented from further sales of that product. Such damages may be enhanced as much as three-fold if we or one of our subsidiaries is found to have willfully infringed valid patent rights of a third party.
Actions In Which We Are The Plaintiff
EpiPen
In 2010, King, which we acquired in 2011 and is a wholly-owned subsidiary, brought a patent-infringement action against Sandoz in the U.S. District Court for the District of New Jersey in connection with Sandoz’s abbreviated new drug application (ANDA) filed with the FDA seeking approval to market an epinephrine injectable product. Sandoz is challenging patents, which expire in 2025, covering the next-generation autoinjector for use with epinephrine that is sold under the EpiPen brand name.
Xeljanz (tofacitinib)
Beginning in 2017, we brought patent-infringement actions against several generic manufacturers that filed separate ANDAs with the FDA seeking approval to market their generic versions of tofacitinib tablets in one or both of 5 mg and 10 mg dosage strengths, and in both immediate and extended release forms. To date, we have settled actions with several manufacturers on terms not material to us. The remaining actions continue in the U.S. District Court for the District of Delaware as described below.
In 2018,January 2021, we brought a separate patent-infringement action against Aurobindo Pharma Limited (Aurobindo) asserting the infringement and validity of the patent covering the active ingredient expiring in December 2025 and the patent covering a polymorphic form of tofacitinib expiring in 2023, which Aurobindo challenged in its ANDA seeking approval to market a generic version of tofacitinib 5 mg and 10 mg tablets. In May 2022, we settled our action against Aurobindo on terms not material to us.
In October 2021, we brought a separate patent-infringement action against Sinotherapeutics Inc. (Sinotherapeutics) asserting the infringement and validity of our patent covering extended release formulations of tofacitinib that was challenged by Sinotherapeutics in its ANDA seeking approval to market a generic version of tofacitinib 11 mg extended release tablets.
In February 2022, we brought a separate patent-infringement action against Teva Pharmaceuticals USA, Inc. (Teva) asserting the infringement and validity of our patent covering extended release formulations of tofacitinib that was challenged by Teva in its ANDA seeking approval to market a generic version of tofacitinib 1122 mg extended release tablets. In April 2022, we settled our action against Teva on terms not material to us.
In January 2021,February 2022, we brought a separate patent-infringement action against AurobindoSlayback Pharma Limited (Aurobindo)LLC (Slayback) asserting the infringement and validity of our compound patent covering the 2025 Patent and the 2023 Patent, which Aurobindoactive ingredient that was challenged by Slayback in its ANDA seeking approval to market a generic version of tofacitinib 5 mg and 10 mg tablets.oral solution 1 mg/mL.
Inlyta (axitinib)
In 2019, Glenmark Pharmaceuticals LimitedLtd. (Glenmark) notified us that it had filed an ANDA with the FDA seeking approval to market a generic version of Inlyta. Glenmark asserts the invalidity and non-infringement of the crystalline form patent for Inlyta that expires in 2030. In 2019, we filed suit against Glenmark in the U.S. District Court for the District of Delaware, asserting the validity and infringement of the crystalline form patent for Inlyta.
Ibrance (palbociclib)
In 2019, several generic companies notified us that they had filed ANDAs with the FDA seeking approval to market generic versions of Ibrance. The companies assert the invalidity and non-infringement of 2 composition of matter patents, one of which expires in 2023 and one of which expires in 2027, as a result of a U.S. Patent Term Extension certificate issued in January 2021, and a method of use patent covering palbociclib, which expires in 2023. In 2019, we brought patent infringement actions against each of the generic filers in various federal courts, asserting the validity and infringement of the patents challenged by the generic companies. Beginning in September 2020, we received correspondence from several generic companies notifying us that they would seek approval to market generic versions of Ibrance.Ibrance capsules. The generic companies assert the invalidity and non-infringement of our crystalline form patent which expires in 2034. Beginning in October 2020, we brought patent infringement actions against each of these generic companies in various federal courts, asserting the validity and infringement of the crystalline form patent. We have settled with certain of these generic companies on terms not material to us, and we dismissed the patent infringement actions against certain other generic companies.
Beginning in January 2021, several generic companies notified us that they had filed ANDAs with the FDA seeking approval to market generic versions of Ibrance tablets. The generic companies are challenging some or all of the following patents: (i) the composition of matter patent expiring in 2027; (ii) the composition of matter patent expiring in 2023; (iii) the method of use patent expiring in 2023; (iv) the crystalline form patent expiring in 2034; and (v) a tablet formulation patent expiring in 2036. We brought patent infringement actions against each of the generic filers in various federal courts, asserting the validity and infringement of the patents challenged by the generic companies. We have settled with one of these generic companies on terms not material to us, and we dismissed the patent infringement actions relating to the crystalline form of patent against certain other generic companies.
PFIZER INC. AND SUBSIDIARY COMPANIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Eucrisa
Beginning in September 2021, several generic companies notified us that they had filed ANDAs with the FDA seeking approval to market generic versions of Eucrisa. The companies assert the invalidity and non-infringement of a composition of matter patent expiring in 2026, two method of use patents expiring in 2027, and one other method of use patent expiring in 2030. In September 2021, we brought patent infringement actions against the generic filers in the U.S. District Court for the District of Delaware, asserting the validity and infringement of the patents challenged by the generic companies.
Action in Which We are the Defendant
Comirnaty
In March 2022, Alnylam Pharmaceuticals, Inc. filed a complaint in the U.S. District Court for the District of Delaware against Pfizer and Pharmacia & Upjohn Co. LLC, our wholly owned subsidiary, alleging that Comirnaty infringes U.S. Patent No. 11,246,933, which was issued in February 2022, and seeking unspecified monetary damages.
Matter Involving Our Collaboration/Licensing Partners
Eliquis
In 2017, NaN generic companies sent BMS Paragraph-IV certification letters informing BMS that they had filed ANDAs seeking approval of generic versions of Eliquis, challenging the validity and infringement of one or more of the 3 patents listed in the Orange Book for Eliquis. NaN of the patents expired in December 2019 and the remaining patents currently are set to expire in 2026 and 2031. Eliquis has been jointly developed and is being commercialized by BMS and Pfizer. BMS and Pfizer filed patent-infringement actions against all generic filers in the U.S. District Court for the District of Delaware and the U.S. District Court for the District of West Virginia, asserting that each of the generic companies’ proposed products would infringe each of the patent(s) that each generic filer challenged. Some generic filers challenged only the 2031 patent, some challenged both the 2031 and 2026 patent, and one generic company challenged all 3 patents. In August 2020, the U.S.
PFIZER INC. AND SUBSIDIARY COMPANIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
District Court for the District of Delaware ruled that both the 2026 patent and the 2031 patent are valid and infringed by the proposed generic products. In August and September 2020, the generic filers appealed the District Court’s decision to the U.S. Court of Appeals for the Federal Circuit. Prior to the August 2020 ruling, we and BMS settled with certain of the companies on terms not material to us, and we and BMS may settle with other generic companies in the future. In September 2021, the U.S. Court of Appeals for the Federal Circuit affirmed the District Court’s decision.
A2. Legal Proceedings––Product Litigation
We are defendants in numerous cases, including but not limited to those discussed below, related to our pharmaceutical and other products. Plaintiffs in these cases seek damages and other relief on various grounds for alleged personal injury and economic loss.
Asbestos
Between 1967 and 1982, Warner-Lambert owned American Optical Corporation (American Optical), which manufactured and sold respiratory protective devices and asbestos safety clothing. In connection with the sale of American Optical in 1982, Warner-Lambert agreed to indemnify the purchaser for certain liabilities, including certain asbestos-related and other claims. Warner-Lambert was acquired by Pfizer in 2000 and is a wholly owned subsidiary of Pfizer. Warner-Lambert is actively engaged in the defense of, and will continue to explore various means of resolving, these claims.
Numerous lawsuits against American Optical, Pfizer and certain of its previously owned subsidiaries are pending in various federal and state courts seeking damages for alleged personal injury from exposure to products allegedly containing asbestos and other allegedly hazardous materials sold by Pfizer and certain of its previously owned subsidiaries.
There also are a small number of lawsuits pending in various federal and state courts seeking damages for alleged exposure to asbestos in facilities owned or formerly owned by Pfizer or its subsidiaries.
Effexor
Beginning in 2011, actions, including purported class actions, were filed in various federal courts against Wyeth and, in certain of the actions, affiliates of Wyeth and certain other defendants relating to Effexor XR, which is the extended-release formulation of Effexor. The plaintiffs in each of the class actions seek to represent a class consisting of all persons in the U.S. and its territories who directly purchased, indirectly purchased or reimbursed patients for the purchase of Effexor XR or generic Effexor XR from any of the defendants from June 14, 2008 until the time the defendants’ allegedly unlawful conduct ceased. The plaintiffs in all of the actions allege delay in the launch of generic Effexor XR in the U.S. and its territories, in violation of federal antitrust laws and, in certain of the actions, the antitrust, consumer protection and various other laws of certain states, as the result of Wyeth fraudulently obtaining and improperly listing certain patents for Effexor XR in the Orange Book, enforcing certain patents for Effexor XR and entering into a litigation settlement agreement with a generic drug manufacturer with respect
PFIZER INC. AND SUBSIDIARY COMPANIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
to Effexor XR. Each of the plaintiffs seeks treble damages (for itself in the individual actions or on behalf of the putative class in the purported class actions) for alleged price overcharges for Effexor XR or generic Effexor XR in the U.S. and its territories since June 14, 2008. All of these actions have been consolidated in the U.S. District Court for the District of New Jersey.
In 2014, the District Court dismissed the direct purchaser plaintiffs’ claims based on the litigation settlement agreement, but declined to dismiss the other direct purchaser plaintiff claims. In 2015, the District Court entered partial final judgments as to all settlement agreement claims, including those asserted by direct purchasers and end-payer plaintiffs, which plaintiffs appealed to the U.S. Court of Appeals for the Third Circuit. In 2017, the U.S. Court of Appeals for the Third Circuit reversed the District Court’s decisions and remanded the claims to the District Court.
Lipitor
Beginning in 2011, purported class actions relating to Lipitor were filed in various federal courts against, among others, Pfizer, certain Pfizer affiliates, and, in most of the actions, Ranbaxy Laboratories Ltd. (Ranbaxy) and certain Ranbaxy affiliates. The plaintiffs in these various actions seek to represent nationwide, multi-state or statewide classes consisting of persons or entities who directly purchased, indirectly purchased or reimbursed patients for the purchase of Lipitor (or, in certain of the actions, generic Lipitor) from any of the defendants from March 2010 until the cessation of the defendants’ allegedly unlawful conduct (the Class Period). The plaintiffs allege delay in the launch of generic Lipitor, in violation of federal antitrust laws and/or state antitrust, consumer protection and various other laws, resulting from (i) the 2008 agreement pursuant to which Pfizer and Ranbaxy settled certain patent litigation involving Lipitor and Pfizer granted Ranbaxy a license to sell a generic version of Lipitor in various markets beginning on varying dates, and (ii) in certain of the actions, the procurement and/or enforcement of certain patents for Lipitor. Each of the actions seeks, among other things, treble damages on behalf of the putative class for alleged price overcharges for Lipitor (or, in certain of the actions, generic Lipitor) during the Class Period. In addition, individual actions have been filed against Pfizer, Ranbaxy and certain of their affiliates, among others, that assert claims and seek relief for the plaintiffs that are substantially similar to the claims asserted and the relief sought in the purported class actions described above. These various actions have been consolidated for pre-trial proceedings in a Multi-District Litigation in the U.S. District Court for the District of New Jersey.
PFIZER INC. AND SUBSIDIARY COMPANIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
In September 2013 and 2014, the District Court dismissed with prejudice the claims of the direct purchasers. In October and November 2014, the District Court dismissed with prejudice the claims of all other Multi-District Litigation plaintiffs. All plaintiffs have appealed the District Court’s orders dismissing their claims with prejudice to the U.S. Court of Appeals for the Third Circuit. In addition, the direct purchaser class plaintiffs appealed the order denying their motion to amend the judgment and for leave to amend their complaint to the Court of Appeals. In 2017, the Court of Appeals reversed the District Court’s decisions and remanded the claims to the District Court.
Also, in 2013, the State of West Virginia filed an action in West Virginia state court against Pfizer and Ranbaxy, among others, that asserts claims and seeks relief on behalf of the State of West Virginia and residents of that state that are substantially similar to the claims asserted and the relief sought in the purported class actions described above.
EpiPen (Direct Purchaser)
Beginning in 2017, purported class actions were filed in various federal courts by indirect purchasers of EpiPen against Pfizer, and/or its affiliates King and Meridian, and/or various entities affiliated with Mylan, and Mylan former Chief Executive Officer, Heather Bresch. The plaintiffs in these actions seek to represent U.S. nationwide classes comprising persons or entities who paid for any portion of the end-user purchase price of an EpiPen between 2009 until the cessation of the defendants’ allegedly unlawful conduct. In February 2020, a similar lawsuit was filed in the U.S. District Court for the District of Kansas against Pfizer, its current and former affiliates King and Meridian, and thevarious Mylan entities, on behalf of a purported U.S. nationwide class of direct purchaser plaintiffs who purchased EpiPen devices directly from the defendants (the 2020 Lawsuit).defendants. Plaintiffs in these actionsthis action generally allege againstthat Pfizer and/or its affiliates, that Pfizer’s and/or its affiliates’and Mylan conspired to delay market entry of generic EpiPen through the settlement of patent litigation regarding EpiPen, and thereby delayed market entry of generic EpiPen in violation of federal and various state antitrust laws. At least 1 lawsuit also alleges that Pfizer and/or Mylan violated the federal Racketeer Influenced and Corrupt Organizations Act (RICO). Plaintiffs also filed various federal antitrust, state consumer protection and unjust enrichment claims against, and relating to conduct attributable solely to, Mylan and/or its affiliates regarding EpiPen.law. Plaintiffs seek treble damages for alleged overcharges for EpiPen since 2011. In 2017, all of these actions, except for the 2020 Lawsuit, were consolidated for coordinated pre-trial proceedings in a Multi-District Litigation in the U.S. District Court for the District of Kansas with other EpiPen-related actions against Mylan and/or its affiliates to which Pfizer, King and Meridian are not parties. In July 2021, Pfizer and plaintiffs filed a stipulation of settlement to resolve the Multi-District Litigation for $345 million. The settlement is subject to court approval, and the payment is being made in accordance with the terms of the settlement agreement. Separately, with respect to the 2020 Lawsuit, in July 2021, the District Court granted Pfizer’sdefendants’ motion to dismiss the direct purchaser complaint, without prejudice.
In July 2020, a new lawsuit wasSeptember 2021, plaintiffs filed in the U.S. District Court for the District of Colorado on behalf of indirect purchasers. Plaintiff represents a putative U.S. nationwide class of persons or entities who paid for any portion of the end-user purchase price of certain refill or replacement EpiPens since 2010. Plaintiff alleges that Pfizer and Meridian misrepresented the shelf-life and expiration date of EpiPen, in violation of the federal RICO statute. Plaintiff seeks treble damages for alleged unnecessary replacement or refill purchases of EpiPens by members of the putative class. Pfizer and plaintiff reached an agreement to settle the action on terms not material to Pfizer, and in July 2021, filed a joint stipulation of dismissal with prejudice.amended complaint.
Nexium 24HR and Protonix
A number of individual and multi-plaintiff lawsuits have been filed against Pfizer, certain of its subsidiaries and/or other pharmaceutical manufacturers in various federal and state courts alleging that the plaintiffs developed kidney-related injuries purportedly as a result of the ingestion of certain proton pump inhibitors. The cases against Pfizer involve Protonix and/or Nexium 24HR and seek compensatory and punitive damages and, in some cases, treble damages, restitution or disgorgement. In 2017, the federal actions were ordered transferred for coordinated pre-trial proceedings to a Multi-District Litigation in the U.S. District Court for the District of New Jersey. As part of our Consumer Healthcare JV transaction with GSK, the JV has agreed to assume, and to indemnify Pfizer for, liabilities arising out of such litigation to the extent related to Nexium 24HR.
PFIZER INC. AND SUBSIDIARY COMPANIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Docetaxel
•Personal Injury Actions
A number of lawsuits have been filed against Hospira and Pfizer in various federal and state courts alleging that plaintiffs who were treated with Docetaxel developed permanent hair loss. The significant majority of the cases also name other defendants, including the manufacturer of the branded product, Taxotere. Plaintiffs seek compensatory and punitive damages.
In 2016, the federal cases were transferred for coordinated pre-trial proceedings to a Multi-District Litigation in the U.S. District Court for the Eastern District of Louisiana.
•Mississippi Attorney General Government Action
In 2018, the Attorney General of Mississippi filed a complaint in Mississippi state court against the manufacturer of the branded product and 8 other manufacturers including Pfizer and Hospira, alleging, with respect to Pfizer and Hospira, a failure to
PFIZER INC. AND SUBSIDIARY COMPANIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
warn about a risk of permanent hair loss in violation of the Mississippi Consumer Protection Act. The action seeks civil penalties and injunctive relief.
Array Securities Litigation
In 2017, 2 purported class actions were filed in the U.S. District Court for the District of Colorado alleging that Array, which we acquired in 2019 and is our wholly owned subsidiary, and certain of its former officers violated federal securities laws in connection with certain disclosures made, or omitted, by Array regarding the NRAS-mutant melanoma program. In 2018, the actions were consolidated into a single proceeding. In March 2021, the parties reached an agreement in principle to resolve the litigation on terms not material to Pfizer, which is subject to final Court approval.
Zantac
A number of lawsuits have been filed against Pfizer in various federal and state courts alleging that plaintiffs developed various types of cancer, or face an increased risk of developing cancer, purportedly as a result of the ingestion of Zantac. The significant majority of these cases also name other defendants that have historically manufactured and/or sold Zantac. Pfizer has not sold Zantac since 2006, and only sold an OTC version of the product. Plaintiffs seek compensatory and punitive damages.
In February 2020, the federal actions were transferred for coordinated pre-trial proceedings to a Multi-District Litigation in the U.S. District Court for the Southern District of Florida. Plaintiffs in the Multi-District Litigation have filed against Pfizer and many other defendants a master personal injury complaint, a consolidated consumer class action complaint alleging, among other things, claims under consumer protection statutes of all 50 states, and a medical monitoring complaint seeking to certify medical monitoring classes under the laws of 13 states. Plaintiffs previously had filed a consolidated third-party payor class action complaint alleging violation of the RICO statute and seeking reimbursement for payments made for the prescription version of Zantac, but the Multi-District Litigation court dismissed that complaint; Plaintiffs have appealed the dismissal to the U.S. Court of Appeals for the Eleventh Circuit. In addition, (i) Pfizer has received service of 2 Canadian class action complaints naming Pfizer and other defendants, and seeking compensatory and punitive damages for personal injury and economic loss, allegedly arising from the defendants’ sale of Zantac in Canada; and (ii) the State of New Mexico and the Mayor and City Council of Baltimore separately filed civil actions against Pfizer and many other defendants in state court, alleging various state statutory and common law claims in connection with the defendants’ alleged sale of Zantac in those jurisdictions. In April 2021, a Judicial Council Coordinated Proceeding was created in the Superior Court of California in Alameda County to coordinate personal injury actions against Pfizer and other defendants filed in California state court.
Chantix
Beginning in August 2021, a number of putative class actions have been filed against Pfizer in various U.S. federal courts following Pfizer’s voluntary recall of Chantix due to the presence of a nitrosamine, N-nitroso-varenicline. Plaintiffs assert that they suffered economic harm purportedly as a result of purchasing Chantix or generic varenicline medicines sold by Pfizer. Plaintiffs seek to represent nationwide and state-specific classes and seek various remedies, including damages and medical monitoring. Similar putative class actions have been filed in Canada and Israel, where the product brand is Champix.
A3. Legal Proceedings––Commercial and Other Matters
Monsanto-Related Matters
In 1997, Monsanto Company (Former Monsanto) contributed certain chemical manufacturing operations and facilities to a newly formed corporation, Solutia Inc. (Solutia), and spun off the shares of Solutia. In 2000, Former Monsanto merged with Pharmacia & Upjohn Company to form Pharmacia. Pharmacia then transferred its agricultural operations to a newly created subsidiary, named Monsanto Company (New Monsanto), which it spun off in a two-stage process that was completed in 2002. Pharmacia was acquired by Pfizer in 2003 and is a wholly owned subsidiary of Pfizer.
In connection with its spin-off that was completed in 2002, New Monsanto assumed, and agreed to indemnify Pharmacia for, any liabilities related to Pharmacia’s former agricultural business. New Monsanto has defended and/or is defending Pharmacia in connection with various claims and litigation arising out of, or related to, the agricultural business, and has been indemnifying Pharmacia when liability has been imposed or settlement has been reached regarding such claims and litigation.
In connection with its spin-off in 1997, Solutia assumed, and agreed to indemnify Pharmacia for, liabilities related to Former Monsanto’s chemical businesses. As the result of its reorganization under Chapter 11 of the U.S. Bankruptcy Code, Solutia’s indemnification obligations relating to Former Monsanto’s chemical businesses are primarily limited to sites that Solutia has owned or operated. In addition, in connection with its spin-off that was completed in 2002, New Monsanto assumed, and agreed to indemnify Pharmacia for, any liabilities primarily related to Former Monsanto’s chemical businesses, including, but not limited to, any such liabilities that Solutia assumed. Solutia’s and New Monsanto’s assumption of, and agreement to indemnify
PFIZER INC. AND SUBSIDIARY COMPANIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Pharmacia for, these liabilities apply to pending actions and any future actions related to Former Monsanto’s chemical businesses in which Pharmacia is named as a defendant, including, without limitation, actions asserting environmental claims, including alleged exposure to polychlorinated biphenyls. Solutia and/or New Monsanto are defending Pharmacia in connection with various claims and litigation arising out of, or related to, Former Monsanto’s chemical businesses, and have been indemnifying Pharmacia when liability has been imposed or settlement has been reached regarding such claims and litigation.
Environmental Matters
In 2009, we submitted a revised site-wide feasibility study with regard to the Wyeth Holdings Corporation’sCorporation (formerly, American Cyanamid Company) discontinued industrial chemical facility in Bound Brook, New Jersey. In 2011, Wyeth Holdings
PFIZER INC. AND SUBSIDIARY COMPANIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Corporation executed an Administrative Settlement Agreement and Order on Consent for Removal Action (the 2011 Administrative Settlement Agreement) with the EPAU.S. Environmental Protection Agency (EPA) with regard to the Bound Brook facility. In accordance with the 2011 Administrative Settlement Agreement, we completed construction of an interim remedy to address the discharge of impacted groundwater from the facility to the Raritan River.remedy. In 2012, the EPA issued a final remediation plan for the Bound Brook facility’s main plant area, which is generally in accordance with one of the remedies evaluated in our revised site-wide feasibility study.area. In 2013, Wyeth Holdings Corporation (now Wyeth Holdings LLC) entered into an Administrative Settlement Agreement and Order on Consent with the EPA to allow us to undertake detailed engineering design of the remedy for the main plant area and to perform a focused feasibility study for 2 adjacent lagoons. In 2015, the U.S., on behalf of the EPA, filed a complaint and consent decree with the federal District Court for the District of New Jersey that allows Wyeth Holdings LLC to complete the design and to implement the remedy for the main plant area. The consent decree (which supersedes the 2011 Administrative Settlement Agreement) was entered by the District Court in 2015. In 2018, the EPA issued a final remediation plan for the 2 adjacent lagoons, which is generally in accordance with one of the remedies evaluated in our focused feasibility study, and, inlagoons. In 2019, Wyeth Holdings LLC entered into an Administrative Settlement Agreement and Order on Consent with the EPA to allow us to undertake detailed engineering design of the remedy for the lagoons. In September 2021, the U.S., on behalf of the EPA, filed a complaint and consent decree with the federal District Court for the District of New Jersey, which the court approved in November 2021, that will allow Wyeth Holdings LLC to complete the design and implement the remedy for the 2 adjacent lagoons.
We have accrued for the estimated costs of the site remedies for the Bound Brook facility.
We are a party to a number of other proceedings brought under the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended, and other state, local or foreign laws in which the primary relief sought is the cost of past and/or future remediation.
Contracts with Iraqi Ministry of Health
In 2017, a number of U.S. service members, civilians, and their families brought a complaint in the U.S. District Court for the District of Columbia against a number of pharmaceutical and medical devices companies, including Pfizer and certain of its subsidiaries, alleging that the defendants violated the U.S. Anti-Terrorism Act. The complaint alleges that the defendants provided funding for terrorist organizations through their sales practices pursuant to pharmaceutical and medical device contracts with the Iraqi Ministry of Health, and seeks monetary relief. In July 2020, the District Court granted defendants’ motions to dismiss and dismissed all of plaintiffs’ claims. The plaintiffs are appealingIn January 2022, the Court of Appeals reversed the District Court’s decision. In February 2022, the defendants filed for en banc review of the Court of Appeals’ decision.
Allergan Complaint for Indemnity
In 2019, Pfizer was named as a defendant in a complaint, along with King, filed by Allergan Finance LLC (Allergan) in the Supreme Court of the State of New York, asserting claims for indemnity related to Kadian, which was owned for a short period by King in 2008, prior to Pfizer's acquisition of King in 2010. This suit was voluntarily discontinued without prejudice in January 2021.
Breach of Contract––Xalkori/Lorbrena
We are a defendant in a breach of contract action brought by New York University (NYU) in the Supreme Court of the State of New York (Supreme Court). NYU alleges that it is entitled to royalties on Pfizer’s sales ofXalkori under the terms of a Research and License Agreement between NYU and Sugen, Inc. Sugen, Inc. was acquired by Pharmacia in August 1999, and Pharmacia was acquired by Pfizer in 2003 and is a wholly owned subsidiary of Pfizer. The action was originally filed in 2013. In 2015, the Supreme Court dismissed the action and, in 2017, the New York State Appellate Division reversed the decision and remanded the proceedings to the Supreme Court. In January 2020, the Supreme Court denied both parties’ summary judgment motions.Viatris Securities Litigation
In October 2020, NYU2021, a putative class action was filed a separate breachin the Court of contract action against Pfizer alleging that it is entitled to royaltiesCommon Pleas of Allegheny County, Pennsylvania on salesbehalf of Lorbrena underformer Mylan N.V. shareholders who received Viatris common stock in exchange for Mylan shares in connection with the termsspin-off of the same NYU-Sugen, Inc. ResearchUpjohn Business and Licensing Agreement.its combination with Mylan (the Transactions). Viatris, Pfizer, and certain of each company’s current and former officers, directors and employees are named as defendants. The complaint alleges that the defendants violated certain provisions of the Securities Act of 1933 in connection with certain disclosures made in or omitted from the registration statement and related prospectus issued in connection with the Transactions. Plaintiff seeks damages, costs and expenses and other equitable and injunctive relief.
A4. Legal Proceedings––Government Investigations
We are subject to extensive regulation by government agencies in the U.S., other developed markets and multiple emerging markets in which we operate. Criminal charges, substantial fines and/or civil penalties, limitations on our ability to conduct business in applicable jurisdictions, corporate integrity or deferred prosecution agreements, as well as reputational harm and
PFIZER INC. AND SUBSIDIARY COMPANIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
increased public interest in the matter could result from government investigations in the U.S. and other jurisdictions in which we do business. These matters often involve government requests for information on a voluntary basis or through subpoenas after which the government may seek additional information through follow-up requests or additional subpoenas. In addition, in a qui tam lawsuit in which the government declines to intervene, the relator may still pursue a suit for the recovery of civil damages and penalties on behalf of the government. Among the investigations by government agencies are the matters discussed below.
PFIZER INC. AND SUBSIDIARY COMPANIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Greenstone Investigations
•U.S. Department of Justice Antitrust Division Investigation
Since July 2017, the U.S. Department of Justice's Antitrust Division has been investigating our former Greenstone generics business. We believe this is related to an ongoing broader antitrust investigation of the generic pharmaceutical industry. We have produced records relating to this investigation.
•State Attorneys General and Multi-District Generics Antitrust Litigation
In April 2018, Greenstone received requests for information from the Antitrust Department of the Connecticut Office of the Attorney General. In May 2019, Attorneys General of more than 40 states plus the District of Columbia and Puerto Rico filed a complaint against a number of pharmaceutical companies, including Greenstone and Pfizer. The matter has been consolidated with a Multi-District Litigation in the Eastern District of Pennsylvania. As to Greenstone and Pfizer, the complaint alleges anticompetitive conduct in violation of federal and state antitrust laws and state consumer protection laws. In June 2020, the State Attorneys General filed a new complaint against a large number of companies, including Greenstone and Pfizer, making similar allegations, but concerning a new set of drugs. This complaint was transferred to the Multi-District Litigation in July 2020. The Multi-District Litigation also includes civil complaints filed by private plaintiffs and state counties against Pfizer, Greenstone and a significant number of other defendants asserting allegations that generally overlap with those asserted by the State Attorneys General.
Subpoena relating to Manufacturing of Quillivant XR
In October 2018, we received a subpoena from the U.S. Attorney’s Office for the Southern District of New York (SDNY) seeking records relating to our relationship with another drug manufacturer and its production and manufacturing of drugs including, but not limited to, Quillivant XR. We have produced records pursuant to the subpoena.
Government Inquiries relating to Meridian Medical Technologies
In February 2019, we received a civil investigative demand from the U.S. Attorney’s Office for the SDNY. The civil investigative demand seeks records and information related to alleged quality issues involving the manufacture of auto-injectors at ourthe Meridian site. In August 2019, we received a HIPAA subpoena from the U.S. Attorney’s Office for the Eastern District of Missouri seeking similar records and information. We are producing records in response to these requests.
U.S. Department of Justice/SEC Inquiry relating to Russian Operations
In June 2019, we received an informal request from the U.S. Department of Justice’s Foreign Corrupt Practices Act (FCPA) Unit seeking documents relating to our operations in Russia. In September 2019, we received a similar request from the SEC’s FCPA Unit. We have produced records pursuant to these requests.
Docetaxel––Mississippi Attorney General Government Investigation
See Legal Proceedings––Product Litigation––Docetaxel––Mississippi Attorney General Government Investigation above for information regarding a government investigation related to Docetaxel marketing practices.
U.S. Department of Justice Inquiries relating to India Operations
In March 2020, we received an informal request from the U.S. Department of Justice's Consumer Protection Branch seeking documents relating to our manufacturing operations in India, including at our former facility located at Irrungattukottai in India. In April 2020, we received a similar request from the U.S. Attorney’s Office for the SDNY regarding a civil investigation concerning operations at our facilities in India. We are producing records pursuant to these requests.
U.S. Department of Justice/SEC Inquiry relating to China Operations
In June 2020, we received an informal request from the U.S. Department of Justice's FCPA Unit seeking documents relating to our operations in China. In August 2020, we received a similar request from the SEC’s FCPA Unit. We are producing records pursuant to these requests.
PFIZER INC. AND SUBSIDIARY COMPANIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Zantac––State of New Mexico and Mayor and City Council of Baltimore Civil Actions
See Note 12A2. Contingencies and Certain Commitments: Legal Proceedings––Product Litigation––Zantac above for information regarding civil actions separately filed by the State of New Mexico and the Mayor and City Council of Baltimore alleging various state statutory and common law claims in connection with the defendants’ alleged sale of Zantac in those jurisdictions.
B. Guarantees and Indemnifications
In the ordinary course of business and in connection with the sale of assets and businesses and other transactions, we often indemnify our counterparties against certain liabilities that may arise in connection with the transaction or that are related to events and activities prior to or following a transaction. If the indemnified party were to make a successful claim pursuant to the terms of the indemnification, we may be required to reimburse the loss. These indemnifications are generally subject to various restrictions and limitations. See Note 2C for a description of the March 2022 indemnity provided by Pfizer to GSK in connection with the issuance of notes by the Consumer Healthcare JV. Historically, we have not paid significant amounts under these provisions and, as of July 4, 2021,April 3, 2022, the estimated fair value of these indemnification obligations wasis not significant.
material to Pfizer.
PFIZER INC. AND SUBSIDIARY COMPANIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
In addition, in connection with our entry into certain agreements and other transactions, our counterparties may agreebe obligated to indemnify us. For example, our collaboration agreement with EMD Serono, Inc. to co-promote Rebif in the U.S. expired at the end of 2015 and included certain indemnity provisions. Patent litigation brought by Biogen Idec MA Inc. against EMD Serono Inc. and Pfizer is pending in the U.S. District Court for the District of New Jersey and the United States Court of Appeals for the Federal Circuit. EMD Serono Inc. has acknowledged that it is obligated to satisfy any award of damages. In addition, in November 2020, we and Mylan completed the transaction to spin-off our Upjohn Business and combine it with Mylan to form Viatris. As part of the transaction and as previously disclosed, each of Viatris and Pfizer has agreed to assume, and to indemnify Pfizerthe other for, liabilities arising out of certain matters. Also, our global agreement with BioNTech to co-develop a mRNA-based coronavirus vaccine program, BNT162b2, aimed at preventing COVID-19 infection, includes certain indemnity provisions pursuant to which each of BioNTech and Pfizer has agreed to indemnify the other for certain liabilities that may arise in connection with certain third-party claims relating to Comirnaty.
We have also guaranteed the long-term debt of certain companies that we acquired and that now are subsidiaries of Pfizer. See Note 7D.
C. Contingent Consideration for Acquisitions
We may be required to make payments to sellers for certain prior business combinations that are contingent upon future events or outcomes. For additional information, see Note 1D1E in our 20202021 Form 10-K.
Note 13. Product,Segment, Geographic and Other Revenue Information
A. GeographicSegment Information
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
The following summarizes revenues by geographic area: |
| | Three Months Ended | | Six Months Ended |
(MILLIONS) | | July 4, 2021 | | June 28, 2020 | | % Change | | July 4, 2021 | | June 28, 2020 | | % Change |
United States | | $ | 7,593 | | | $ | 5,113 | | | 48 | | | $ | 15,190 | | | $ | 10,403 | | | 46 | |
Developed Europe | | 4,577 | | | 1,864 | | | * | | 7,615 | | | 3,573 | | | * |
Developed Rest of World | | 2,997 | | | 989 | | | * | | 4,120 | | | 1,908 | | | * |
Emerging Markets | | 3,810 | | | 1,897 | | | * | | 6,634 | | | 4,063 | | | 63 | |
Revenues | | $ | 18,977 | | | $ | 9,864 | | | 92 | | | $ | 33,559 | | | $ | 19,947 | | | 68 | |
* Indicates calculation not meaningful or results are equal to or greater than 100%. |
|
We manage our commercial operations through 2 operating segments: Biopharma and PC1. The Biopharma and PC1 segments are each led by a single manager. Biopharma is the only reportable segment. Biopharma is a science-based medicines business that includes six therapeutic areas – Vaccines, Hospital, Oncology, Internal Medicine, Rare Disease, and Inflammation & Immunology. The Hospital therapeutic area commercializes our global portfolio of sterile injectable and anti-infective medicines, as well as an oral COVID-19 treatment.WeEach operating segment has responsibility for its commercial activities. Regional commercial organizations market, distribute and sell our collaboration partner, BioNTech, have entered into agreements toproducts and are supported by global platform functions that are responsible for the research, development, manufacturing and supply pre-specified doses of BNT162b2 with multipleour products and global corporate enabling functions. Biopharma receives its R&D services from WRDM and GPD. These services include IPR&D projects for new investigational products and additional indications for in-line products. Each operating segment has a geographic footprint across developed and emerging nations aroundmarkets. Our chief operating decision maker uses the worldrevenues and are continuing to deliver doses of BNT162b2 under such agreements. We currently sell the BNT162b2 vaccine directly to government and government sponsored customers. This includes supply agreements entered into in November 2020 and February and May 2021 with the European Commission (EC) on behalfearnings of the different EU member statesoperating segments, among other factors, for performance evaluation and resource allocation.
Other Costs and Business Activities––Certain pre-tax costs are not allocated to our operating segment results, such as costs associated with: (i) R&D and medical expenses managed by our WRDM and GPD organizations, (ii) corporate enabling functions and other corporate costs, (iii) overhead costs primarily associated with our manufacturing operations, (iv) our share of earnings from the Consumer Healthcare JV, as well as (v) all amortization of intangible assets, acquisition-related items, and certain other countries. Each EU member state submits its own BNT162b2 vaccine ordersignificant items representing substantive and/or unusual, and in some cases recurring, items that are evaluated on an individual basis by management and that, either as a result of their nature or size, would not be expected to us and is responsible for payment pursuantoccur as part of our normal business on a regular basis. Beginning in the first quarter of 2022, acquisition-related items may now include the following purchase accounting impacts that previously would have been included as part of a reconciling item entitled “Purchase accounting adjustments” that we no longer separately present: (i) the incremental charge to termscost of the supply agreements negotiated by the EC.
B. Other Revenue Information
Significant Customers
For information on our significant wholesale customers, see Note 17B in our 2020 Form 10-K. Additionally, revenuessales from the U.S. government represented 12%sale of acquired inventory that was written up to fair value, (ii) depreciation related to the increase/decrease in fair value of acquired fixed assets, (iii) amortization related to the increase in fair value of acquired debt and 14% of total revenues(iv) the fair value changes for the three and six months ended July 4, 2021, respectively, and primarily represent sales of BNT162b2. Accounts receivable from the U.S. government represented 9% of total trade accounts receivable as of July 4, 2021, and primarily relate to sales of BNT162b2.contingent
Significant Product Revenues
The following provides detailed revenue information for several of our major products:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(MILLIONS) | | | | Three Months Ended | | Six Months Ended |
PRODUCT | | PRIMARY INDICATION OR CLASS | | July 4, 2021 | | June 28, 2020 | | July 4, 2021 | | June 28, 2020 |
TOTAL REVENUES(a) | | | | $ | 18,977 | | | $ | 9,864 | | | $ | 33,559 | | | $ | 19,947 | |
Vaccines | | | | $ | 9,234 | | | $ | 1,247 | | | $ | 14,127 | | | $ | 2,857 | |
BNT162b2 direct sales and alliance revenues | | Active immunization to prevent COVID-19 | | 7,838 | | | 0 | | | 11,300 | | | 0 | |
Prevnar 13/Prevenar 13 | | Pneumococcal disease | | 1,241 | | | 1,116 | | | 2,524 | | | 2,566 | |
FSME/IMMUN-TicoVac | | Tick-borne encephalitis disease | | 61 | | | 45 | | | 114 | | | 93 | |
Nimenrix | | Meningococcal disease | | 49 | | | 56 | | | 95 | | | 130 | |
All other Vaccines | | Various | | 46 | | | 30 | | | 94 | | | 68 | |
PFIZER INC. AND SUBSIDIARY COMPANIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(MILLIONS) | | | | Three Months Ended | | Six Months Ended |
PRODUCT | | PRIMARY INDICATION OR CLASS | | July 4, 2021 | | June 28, 2020 | | July 4, 2021 | | June 28, 2020 |
Oncology | | | | $ | 3,145 | | | $ | 2,647 | | | $ | 6,007 | | | $ | 5,082 | |
Ibrance | | HR-positive/HER2-negative metastatic breast cancer | | 1,404 | | | 1,349 | | | 2,657 | | | 2,598 | |
Xtandi alliance revenues | | mCRPC, nmCRPC, mCSPC | | 303 | | | 266 | | | 570 | | | 475 | |
Inlyta | | Advanced RCC | | 257 | | | 195 | | | 486 | | | 364 | |
Sutent | | Advanced and/or metastatic RCC, adjuvant RCC, refractory GIST (after disease progression on, or intolerance to, imatinib mesylate) and advanced pancreatic neuroendocrine tumor | | 194 | | | 209 | | | 394 | | | 414 | |
Bosulif | | Philadelphia chromosome–positive chronic myelogenous leukemia | | 136 | | | 113 | | | 259 | | | 213 | |
Xalkori | | ALK-positive and ROS1-positive advanced NSCLC | | 120 | | | 138 | | | 255 | | | 287 | |
Ruxience(b) | | Non-hodgkin’s lymphoma, chronic lymphocytic leukemia, granulomatosis with polyangiitis (Wegener’s Granulomatosis) and microscopic polyangiitis | | 120 | | | 11 | | | 218 | | | 19 | |
Zirabev(b) | | Treatment of mCRC; unresectable, locally advanced, recurrent or metastatic NSCLC; recurrent glioblastoma; metastatic RCC; and persistent, recurrent or metastatic cervical cancer | | 129 | | | 9 | | | 215 | | | 15 | |
Retacrit(b) | | Anemia | | 103 | | | 87 | | | 212 | | | 176 | |
Lorbrena | | ALK-positive metastatic NSCLC | | 66 | | | 46 | | | 126 | | | 88 | |
Aromasin | | Post-menopausal early and advanced breast cancer | | 51 | | | 39 | | | 103 | | | 72 | |
Besponsa | | Relapsed or refractory B-cell acute lymphoblastic leukemia | | 45 | | | 46 | | | 95 | | | 90 | |
Braftovi | | In combination with Mektovi for metastatic melanoma in patients with a BRAFV600E/K mutation and, in combination with Erbitux® (cetuximab), for the treatment of BRAFV600E-mutant mCRC after prior therapy | | 42 | | | 36 | | | 89 | | | 74 | |
Mektovi | | In combination with Braftovi for metastatic melanoma in patients with a BRAFV600E/K mutation | | 36 | | | 32 | | | 71 | | | 69 | |
All other Oncology | | Various | | 138 | | | 69 | | | 257 | | | 128 | |
Internal Medicine | | | | $ | 2,403 | | | $ | 2,279 | | | $ | 4,997 | | | $ | 4,610 | |
Eliquis direct sales and alliance revenues | | Nonvalvular atrial fibrillation, deep vein thrombosis, pulmonary embolism | | 1,481 | | | 1,272 | | | 3,124 | | | 2,572 | |
Chantix/Champix | | An aid to smoking cessation treatment in adults 18 years of age or older | | 184 | | | 235 | | | 401 | | | 505 | |
Premarin family | | Symptoms of menopause | | 128 | | | 152 | | | 271 | | | 304 | |
Toviaz | | Overactive bladder | | 62 | | | 64 | | | 119 | | | 124 | |
BMP2 | | Development of bone and cartilage | | 66 | | | 57 | | | 115 | | | 127 | |
Pristiq | | Depression | | 42 | | | 43 | | | 101 | | | 84 | |
All other Internal Medicine | | Various | | 440 | | | 455 | | | 865 | | | 894 | |
Hospital(a) | | | | $ | 2,259 | | | $ | 1,863 | | | $ | 4,602 | | | $ | 3,951 | |
Sulperazon | | Bacterial infections | | 141 | | | 102 | | | 334 | | | 289 | |
Medrol | | Anti-inflammatory glucocorticoid | | 112 | | | 78 | | | 211 | | | 207 | |
Zavicefta | | Bacterial infections | | 104 | | | 46 | | | 198 | | | 95 | |
Vfend | | Fungal infections | | 72 | | | 75 | | | 153 | | | 149 | |
Fragmin | | Treatment/prevention of venous thromboembolism | | 77 | | | 58 | | | 149 | | | 118 | |
EpiPen | | Epinephrine injection used in treatment of life-threatening allergic reactions | | 80 | | | 75 | | | 147 | | | 160 | |
Zithromax | | Bacterial infections | | 43 | | | 55 | | | 132 | | | 193 | |
Zyvox | | Bacterial infections | | 48 | | | 55 | | | 103 | | | 125 | |
Precedex | | Sedation agent in surgery or intensive care | | 42 | | | 114 | | | 97 | | | 156 | |
IVIg Products(c) | | Various | | 107 | | | 85 | | | 212 | | | 183 | |
Pfizer CentreOne(d) | | Various | | 437 | | | 224 | | | 827 | | | 376 | |
All other Anti-infectives | | Various | | 425 | | | 321 | | | 823 | | | 717 | |
All other Hospital | | Various | | 569 | | | 574 | | | 1,217 | | | 1,183 | |
Inflammation & Immunology (I&I) | | $ | 1,041 | | | $ | 1,149 | | | $ | 2,107 | | | $ | 2,127 | |
Xeljanz | | RA, PsA, UC, active polyarticular course juvenile idiopathic arthritis | | 586 | | | 635 | | | 1,124 | | | 1,086 | |
Enbrel (Outside the U.S. and Canada) | | RA, juvenile idiopathic arthritis, PsA, plaque psoriasis, pediatric plaque psoriasis, ankylosing spondylitis and nonradiographic axial spondyloarthritis | | 286 | | | 337 | | | 605 | | | 684 | |
consideration. The operating results of PC1, our global contract development and manufacturing organization, are included in Other business activities.Segment Assets––We manage our assets on a total company basis, not by operating segment, as our operating assets are shared or commingled. Therefore, our chief operating decision maker does not regularly review any asset information by operating segment and, accordingly, we do not report asset information by operating segment. Total assets were $184 billion as of April 3, 2022 and $181 billion as of December 31, 2021.
Selected Income Statement Information
| | | | | | | | | | | | | | | | | | | | | | | | | | |
The following provides selected income statement information by reportable segment: |
| | Three Months Ended |
| | Revenues | | Earnings(a) |
(MILLIONS) | | April 3, 2022 | | April 4, 2021 | | April 3, 2022 | | April 4, 2021 |
Reportable Segment: | | | | | | | | |
Biopharma | | $ | 25,323 | | | $ | 14,125 | | | $ | 13,438 | | | $ | 8,383 | |
Other business activities(b) | | 338 | | | 391 | | | (2,475) | | | (2,048) | |
Reconciling Items: | | | | | | | | |
Amortization of intangible assets | | — | | | — | | | (835) | | | (870) | |
Acquisition-related items | | — | | | — | | | (187) | | | 61 | |
Certain significant items(c) | | — | | | — | | | (891) | | | 166 | |
| | $ | 25,661 | | | $ | 14,516 | | | $ | 9,050 | | | $ | 5,692 | |
|
| | |
| | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
(a)Income from continuing operations before provision/(benefit) for taxes on income. Biopharma’s earnings include dividend income from our investment in ViiV of $56 million in the first quarter of 2022 and $27 million in the first quarter of 2021.
(b)Other business activities include revenues and costs associated with PC1, as well as costs that we do not allocate to our operating segments, per above.
(c)Certain significant items are substantive and/or unusual, and in some cases recurring, items (as noted above). For earnings in the first quarter of 2022, includes, among other items, net losses on equity securities of $698 million recorded in Other (income)/deductions––net. For earnings in the first quarter of 2021, includes, among other items, net gains on equity securities of $399 million recorded in Other (income)/deductions––net.
B. Geographic Information
| | | | | | | | | | | | | | | | | | | | | | | | | | |
The following summarizes revenues by geographic area: | | | | | | |
| | Three Months Ended | | |
(MILLIONS) | | April 3, 2022 | | April 4, 2021 | | % Change | | | | | | |
United States | | $ | 8,918 | | | $ | 7,530 | | | 18 | | | | | | | |
Developed Europe | | 6,090 | | | 3,038 | | | 100 | | | | | | | |
Developed Rest of World | | 3,286 | | | 1,123 | | | 193 | | | | | | | |
Emerging Markets | | 7,367 | | | 2,824 | | | 161 | | | | | | | |
Revenues | | $ | 25,661 | | | $ | 14,516 | | | 77 | | | | | | | |
|
|
C. Other Revenue Information
Significant Customers––For information on our significant wholesale customers, see Note 17C in our 2021 Form 10-K. Additionally, revenues from the U.S. government represented 19% of total revenues for the three months ended April 3, 2022, and primarily represent sales of Comirnaty and Paxlovid. Accounts receivable from the U.S. government represented 11% of total trade accounts receivable as of April 3, 2022, and primarily relate to sales of Comirnaty and Paxlovid.
PFIZER INC. AND SUBSIDIARY COMPANIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(MILLIONS) | | | | Three Months Ended | | Six Months Ended |
PRODUCT | | PRIMARY INDICATION OR CLASS | | July 4, 2021 | | June 28, 2020 | | July 4, 2021 | | June 28, 2020 |
Inflectra/Remsima(b) | | Crohn’s disease, pediatric Crohn’s disease, UC, pediatric UC, RA in combination with methotrexate, ankylosing spondylitis, PsA and plaque psoriasis | | 136 | | | 150 | | | 313 | | | 308 | |
All other I&I | | Various | | 33 | | | 26 | | | 65 | | | 48 | |
Rare Disease | | | | $ | 895 | | | $ | 681 | | | $ | 1,720 | | | $ | 1,319 | |
Vyndaqel/Vyndamax | | ATTR-cardiomyopathy and polyneuropathy | | 501 | | | 277 | | | 953 | | | 508 | |
BeneFIX | | Hemophilia B | | 112 | | | 109 | | | 225 | | | 230 | |
Genotropin | | Replacement of human growth hormone | | 109 | | | 106 | | | 189 | | | 209 | |
Refacto AF/Xyntha | | Hemophilia A | | 77 | | | 91 | | | 165 | | | 181 | |
Somavert | | Acromegaly | | 68 | | | 67 | | | 133 | | | 131 | |
All other Rare Disease | | Various | | 29 | | | 31 | | | 55 | | | 61 | |
Total Alliance revenues | | | | $ | 1,880 | | | $ | 1,404 | | | $ | 3,650 | | | $ | 2,786 | |
Total Biosimilars(b) | | | | $ | 559 | | | $ | 289 | | | $ | 1,089 | | | $ | 578 | |
Total Sterile Injectable Pharmaceuticals(e) | | $ | 1,381 | | | $ | 1,233 | | | $ | 2,863 | | | $ | 2,634 | |
Significant Product RevenuesThe following provides detailed revenue information for several of our major products:
| | | | | | | | | | | | | | | | | | | | | | | | |
(MILLIONS) | | | | Three Months Ended | | |
PRODUCT | | PRIMARY INDICATION OR CLASS | | April 3, 2022 | | April. 4, 2021 | | | | |
TOTAL REVENUES(a) | | | | $ | 25,661 | | | $ | 14,516 | | | | | |
PFIZER BIOPHARMACEUTICALS GROUP (BIOPHARMA)(a), (b) | | $ | 25,323 | | | $ | 14,125 | | | | | |
Vaccines | | | | $ | 14,941 | | | $ | 4,894 | | | | | |
Comirnaty direct sales and alliance revenues | | Active immunization to prevent COVID-19 | | 13,227 | | | 3,462 | | | | | |
Prevnar family(c) | | Pneumococcal disease | | 1,565 | | | 1,284 | | | | | |
Nimenrix | | Meningococcal ACWY disease | | 77 | | | 46 | | | | | |
FSME-IMMUN/TicoVac | | Tick-borne encephalitis disease | | 42 | | | 53 | | | | | |
All other Vaccines | | Various | | 29 | | | 49 | | | | | |
Hospital(a) | | | | $ | 3,191 | | | $ | 1,886 | | | | | |
Paxlovid | | COVID-19 infection (high risk population) | | 1,470 | | | — | | | | | |
Sulperazon | | Bacterial infections | | 210 | | | 192 | | | | | |
Zithromax | | Bacterial infections | | 125 | | | 89 | | | | | |
Ig Portfolio(d) | | Various | | 107 | | | 105 | | | | | |
Zavicefta | | Bacterial infections | | 104 | | | 94 | | | | | |
Medrol | | Anti-inflammatory glucocorticoid | | 76 | | | 99 | | | | | |
Fragmin | | Treatment/prevention of venous thromboembolism | | 70 | | | 71 | | | | | |
Vfend | | Fungal infections | | 65 | | | 80 | | | | | |
All other Anti-infectives | | Various | | 381 | | | 455 | | | | | |
All other Hospital | | Various | | 583 | | | 700 | | | | | |
Oncology | | | | $ | 2,967 | | | $ | 2,862 | | | | | |
Ibrance | | HR-positive/HER2-negative metastatic breast cancer | | 1,237 | | | 1,254 | | | | | |
Xtandi alliance revenues | | mCRPC, nmCRPC, mCSPC | | 268 | | | 267 | | | | | |
Inlyta | | Advanced RCC | | 234 | | | 229 | | | | | |
Zirabev(e) | | Treatment of mCRC; unresectable, locally advanced, recurrent or metastatic NSCLC; recurrent glioblastoma; metastatic RCC; and persistent, recurrent or metastatic cervical cancer | | 147 | | | 86 | | | | | |
Bosulif | | Philadelphia chromosome–positive chronic myelogenous leukemia | | 128 | | | 123 | | | | | |
Xalkori | | ALK-positive and ROS1-positive advanced NSCLC | | 127 | | | 134 | | | | | |
Ruxience(e) | | Non-hodgkin’s lymphoma, chronic lymphocytic leukemia, granulomatosis with polyangiitis (Wegener’s Granulomatosis) and microscopic polyangiitis | | 124 | | | 98 | | | | | |
Retacrit(e) | | Anemia | | 115 | | | 109 | | | | | |
Sutent | | Advanced and/or metastatic RCC, adjuvant RCC, refractory GIST (after disease progression on, or intolerance to, imatinib mesylate) and advanced pancreatic neuroendocrine tumor | | 114 | | | 200 | | | | | |
Lorbrena | | ALK-positive metastatic NSCLC | | 72 | | | 60 | | | | | |
Bavencio alliance revenues | | Locally advanced or metastatic urothelial carcinoma; metastatic Merkel cell carcinoma; immunotherapy and tyrosine kinase inhibitor combination for patients with advanced RCC | | 67 | | | 32 | | | | | |
Aromasin | | Post-menopausal early and advanced breast cancer | | 62 | | | 52 | | | | | |
Trazimera(e) | | HER-positive breast cancer and metastatic stomach cancers | | 52 | | | 45 | | | | | |
Besponsa | | Relapsed or refractory B-cell acute lymphoblastic leukemia | | 51 | | | 50 | | | | | |
Braftovi | | In combination with Mektovi for metastatic melanoma in patients with a BRAFV600E/K mutation and, in combination with Erbitux® (cetuximab), for the treatment of BRAFV600E-mutant mCRC after prior therapy | | 48 | | | 47 | | | | | |
Mektovi | | In combination with Braftovi for metastatic melanoma in patients with a BRAFV600E/K mutation | | 40 | | | 35 | | | | | |
All other Oncology | | Various | | 81 | | | 41 | | | | | |
Internal Medicine | | | | $ | 2,440 | | | $ | 2,594 | | | | | |
Eliquis alliance revenues and direct sales | | Nonvalvular atrial fibrillation, deep vein thrombosis, pulmonary embolism | | 1,793 | | | 1,643 | | | | | |
Premarin family | | Symptoms of menopause | | 102 | | | 143 | | | | | |
BMP2 | | Development of bone and cartilage | | 67 | | | 49 | | | | | |
Toviaz | | Overactive bladder | | 54 | | | 57 | | | | | |
Chantix/Champix | | An aid to smoking cessation treatment in adults 18 years of age or older | | 2 | | | 217 | | | | | |
All other Internal Medicine | | Various | | 423 | | | 484 | | | | | |
Rare Disease | | | | $ | 963 | | | $ | 824 | | | | | |
Vyndaqel/Vyndamax | | ATTR-cardiomyopathy and polyneuropathy | | 612 | | | 453 | | | | | |
BeneFIX | | Hemophilia B | | 112 | | | 112 | | | | | |
PFIZER INC. AND SUBSIDIARY COMPANIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
| | | | | | | | | | | | | | | | | | | | | | | | |
(MILLIONS) | | | | Three Months Ended | | |
PRODUCT | | PRIMARY INDICATION OR CLASS | | April 3, 2022 | | April. 4, 2021 | | | | |
Genotropin | | Replacement of human growth hormone | | 80 | | | 80 | | | | | |
Somavert | | Acromegaly | | 68 | | | 65 | | | | | |
Refacto AF/Xyntha | | Hemophilia A | | 66 | | | 89 | | | | | |
All other Rare Disease | | Various | | 25 | | | 26 | | | | | |
Inflammation & Immunology (I&I) | | | | $ | 821 | | | $ | 1,065 | | | | | |
Xeljanz | | RA, PsA, UC, active polyarticular course juvenile idiopathic arthritis, ankylosing spondylitis | | 372 | | | 538 | | | | | |
Enbrel (Outside the U.S. and Canada) | | RA, juvenile idiopathic arthritis, PsA, plaque psoriasis, pediatric plaque psoriasis, ankylosing spondylitis and nonradiographic axial spondyloarthritis | | 280 | | | 319 | | | | | |
Inflectra(e) | | Crohn’s disease, pediatric Crohn’s disease, UC, pediatric UC, RA in combination with methotrexate, ankylosing spondylitis, PsA and plaque psoriasis | | 135 | | | 177 | | | | | |
All other I&I | | Various | | 35 | | | 31 | | | | | |
PFIZER CENTREONE(b) | | | | $ | 338 | | | $ | 391 | | | | | |
Total Alliance revenues | | | | $ | 2,314 | | | $ | 1,770 | | | | | |
Total Biosimilars(e) | | | | $ | 605 | | | $ | 530 | | | | | |
Total Sterile Injectable Pharmaceuticals(f) | | $ | 1,331 | | | $ | 1,482 | | | | | |
(a)On November 16, 2020,December 31, 2021, we completed the spin-off and the combinationsale of our Upjohn Business with MylanMeridian subsidiary. Prior to form Viatris. See Note 1A.its sale, Meridian was managed as part of the Hospital therapeutic area. Beginning in the fourth quarter of 2020,2021, the financial results of Meridian were reflected as discontinued operations. Prior-period financial information has been restated, as appropriate. See Note 1A.
(b)At the beginning of our Meridian subsidiary,fiscal fourth quarter of 2021, we reorganized our commercial operations and began to manage our commercial operations through a new global structure consisting of 2 operating segments, each led by a single manager: Biopharma, our innovative science-based biopharmaceutical business, and PC1. PC1, which was previously included in our former Upjohn operating segment, are reported inhad been managed within the Hospital therapeutic area, for all periods presented.
(b)Biosimilars are highly similar versions of approved and authorized biological medicines and primarily include revenues from Inflectra/Remsima, Ruxience, Zirabev and Retacrit.
(c)Intravenous immunoglobulin (IVIg) products include the revenues from Panzyga, Octagam and Cutaquig.
(d)Pfizer CentreOne includes revenues from our contract manufacturing, including certain Comirnaty-related manufacturing activities performed on behalf of BioNTech ($47 million for the first quarter of 2022), and revenues from our active pharmaceutical ingredient sales operation, as well as revenues related to our manufacturing and supply agreements with former legacy Pfizer businesses/partnerships, including but not limited to, transitional manufacturing and supply agreements with Viatris following the spin-off of the Upjohn Business. We have revised prior period information to conform to the current management structure.
(c)Prevnar family include revenues from Prevnar 13/Prevenar 13 (pediatric and adult) and Prevnar 20 (adult).
(d)Immunoglobulin (Ig) portfolio includes the revenues from Panzyga, Octagam and Cutaquig.
(e)Biosimilars are highly similar versions of approved and authorized biological medicines and primarily include revenues from Zirabev, Inflectra, Ruxience, Retacrit, and Trazimera.
(f)Total Sterile Injectable Pharmaceuticals represents the total of all branded and generic injectable products in the Hospital therapeutic area, including anti-infective sterile injectable pharmaceuticals.
Remaining Performance Obligations––Contracted revenue expected to be recognized from remaining performance obligations for firm orders in long-term contracts to supply Comirnaty to our customers totaled approximately $30 billion as of April 3, 2022, which includes amounts received in advance and deferred, as well as amounts that will be invoiced as we deliver these products to our customers in future periods. Of this amount, we expect to recognize revenue of approximately $18 billion in 2022, $12 billion in 2023 and $300 million in 2024. Remaining performance obligations exclude arrangements with an original expected contract duration of less than one year.
Deferred Revenues
Revenues––Our deferred revenues primarily relate to advance payments received or receivable in connection with contracts that we entered into during 20212022 and 20202021 with various government or government sponsored customers in international markets for supply of BNT162b2.Comirnaty and Paxlovid. The deferred revenues associated with the advance payments related to BNT162b2Comirnaty and Paxlovid total $4.3$3.3 billion as of July 4, 2021April 3, 2022 and $957 millionthe deferred revenues associated with the advance payments of Comirnaty total $3.3 billion as of December 31, 20202021, with $3.0 billion and are$258 million recorded in current liabilities.liabilities and noncurrent liabilities, respectively, as of April 3, 2022, and $3.0 billion and $249 million recorded in current liabilities and noncurrent liabilities, respectively, as of December 31, 2021. There were no deferred revenues associated with Paxlovid as of December 31, 2021. The increase in the BNT162b2Comirnaty and Paxlovid deferred revenuesrevenue balances were effectively unchanged during the first sixthree months of 2021 was2022 as amounts recognized in Revenues as we delivered the result ofproducts to our customers were offset by additional advance payments received as we entered into new or amended contracts, orincluding new advance payments received for Paxlovid contracts, and additional advance payments received as we invoiced customers in advance of vaccine deliveries less amounts recognized in Revenues as we delivered doses to our customers.product deliveries. During the secondfirst quarter and first six months of 2021,2022, we recognized revenue of $622 million and $814 million, respectively,$1.6 billion that was included in the balance of BNT162b2Comirnaty deferred revenues as of December 31, 2020.2021. The BNT162b2Comirnaty and Paxlovid deferred revenues as of July 4, 2021April 3, 2022 will be recognized in Revenues proportionately as we deliver dosestransfer control of the vaccineproducts to our customers and satisfy our performance obligation under the contracts, which we expectwith the amounts included in current liabilities expected to occurbe recognized in Revenues within the next 12 months.months, and the amounts included in noncurrent liabilities expected to be recognized in Revenues in 2023 and in the first quarter of 2024. Deferred revenues associated with contracts for other products were not significant as of April 3, 2022 or December 31, 2021.
ITEM 2. MANAGEMENTS’SMANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
OVERVIEW OF OUR PERFORMANCE, OPERATING ENVIRONMENT, STRATEGY AND OUTLOOK
Our Business and Strategy
Most of our revenues come from the manufacture and sale of biopharmaceutical products. With the formation of the Consumer Healthcare JV in 2019 and the completion of the spin-off and combination of our Upjohn Business with Mylan in November 2020, Pfizer has transformed into a focused, global leader in science-based innovative medicines and vaccines. We operate as a single operating segment engaged in the discovery, development, manufacturing, marketing, sale and distribution of biopharmaceutical products worldwide. The financial results of the Upjohn Business and the Mylan-Japan collaboration are reflected as discontinued operations. Prior-period information has been restated to reflect our current organization structure. We expect to incur costs of approximately $700 million in connection with separating Upjohn, of which approximately 75% has been incurred since inception and through the second quarter of 2021. These charges include costs and expenses related to separation of legal entities and transaction costs.
For additional information about our business, strategy and operating environment, see the Item 1. Business section and Overview of Our Performance, Operating Environment, Strategy and Outlook section within MD&A of our 2020 Form 10-K.
References to operational variances pertain to period-over-period changes that exclude the impact of foreign exchange rates. Although foreign exchange rate changes are part of our business, they are not within our control and since they can mask positive or negative trends in the business, we believe presenting operational variances excluding these foreign exchange changes provides useful information to evaluate our results.
Our Business and Strategy
We apply science and our global resources to bring therapies to people that extend and significantly improve their lives through the discovery, development, manufacture, marketing, sale and distribution of biopharmaceutical products worldwide. At the beginning of our fiscal fourth quarter of 2021, we reorganized our commercial operations and began to manage our commercial operations through a new global structure consisting of two operating segments: Biopharma and PC1. Biopharma is the only reportable segment. See Note 1A. We expect to incur costs of approximately $700 million in connection with separating Upjohn, of which, approximately 80% has been incurred since inception and through the first quarter of 2022. These charges include costs and expenses related to separation of legal entities and transaction costs.
For additional information about our business, strategy and operating environment, see the Item 1. Business section and Overview of Our Performance, Operating Environment, Strategy and Outlook section within MD&A of our 2021 Form 10-K.
Our Business Development Initiatives
We are committed to strategically capitalizing on growth opportunities, primarily by advancing our own product pipeline and maximizing the value of our existing products, as well asbut also through various business development activities.
Our significant recent business development activities include:include the transactions discussed in Note 2 and the following:
Collaboration with Arvinas, Inc. (Arvinas)Acquisition of Biohaven––In July 2021,May 2022, we and Biohaven announced a global collaboration with Arvinas to developthat the companies entered into an agreement under which we will acquire Biohaven, the maker of Nurtec® ODT (rimegepant), an innovative dual-acting migraine therapy approved for both acute treatment and commercialize ARV-471, an investigational oral PROTAC® (PROteolysis TArgeting Chimera) estrogen receptor protein degrader. The estrogen receptor is a well-known disease driverepisodic prevention of migraine in most breast cancers. ARV-471 is currently in a Phase 2 dose expansion clinical trial for the treatment of patients with estrogen receptor positive / human epidermal growth factor receptor 2 negative (ER+/HER2-) locally advanced or metastatic breast cancer.adults. Under the terms of the collaboration agreement, we made an upfront payment to Arvinas of $650 million in July 2021. Separately, we will make a $350 million equity investment in Arvinas, receiving approximately 3.5 million newly issuedacquire all outstanding common shares of ArvinasBiohaven not already owned by us for $148.50 per share, in cash. The proposed transaction includes the acquisition of Biohaven’s CGRP programs, including rimegepant, zavegepant and a portfolio of five pre-clinical CGRP assets. Biohaven common stock, pricedshareholders, including Pfizer, will also receive 0.5 of a share of New Biohaven, a new publicly traded company that will retain Biohaven’s non-CGRP development stage pipeline compounds, per Biohaven common share. Pfizer will pay transaction consideration totaling approximately $11.6 billion in cash. Pfizer will also make payments at a 30% premiumclosing to settle Biohaven’s third party debt and for the 30-day volume weighted average priceredemption of all outstanding shares of Biohaven’s redeemable preferred stock.
This agreement follows on July 20,the November 2021 representing an equity ownership stake bycollaboration for the commercialization of rimegepant and zavegepant outside the U.S., in connection with which Pfizer acquired 2.6% of approximately 7% asBiohaven’s common stock. New Biohaven will also have the right to receive tiered royalties from Pfizer on any annual net sales of July 20, 2021. Closing of the equity investment agreement is contingent on completion of review under antitrust laws, including the Hart-Scott-Rodino Antitrust Improvements Act of 1976rimegepant and zavegepant in the U.S., in excess of $5.25 billion. The proposed transaction is subject to the completion of the New Biohaven spin-off transaction and other customary closing conditions. Arvinas is also eligible to receive up to $400 million inconditions, including receipt of regulatory approvals and approval milestones and up to $1 billion in commercial milestones.by Biohaven’s shareholders. The companies will equally share worldwide development costs, commercialization expenses and profits.expect the transaction to close by early 2023.
Acquisition of Amplyx Pharmaceuticals, Inc.(Amplyx)ReViral––In April 2021,2022, we and ReViral announced that the companies entered into an agreement under which we acquired Amplyx,will acquire ReViral, a privately-heldprivately held, clinical-stage biopharmaceutical company dedicatedfocused on discovering, developing and commercializing novel antiviral therapeutics that target respiratory syncytial virus. Under the terms of the agreement, we will acquire ReViral for a total consideration of up to the$525 million, including upfront and development milestones, subject to customary closing conditions, including receipt of therapies for debilitating and life-threatening diseases that affect people with compromised immune systems. Amplyx’s lead compound, Fosmanogepix (APX001), is a novel investigational asset in Phase 2 development for the treatment of invasive fungal infections.regulatory approvals.
For a discussion of recent significant business development activities, see Note 2. For a description of the more significant recent transactions through February 25, 2021,24, 2022, the filing date of our 20202021 Form 10-K, see Note 2 in our 20202021 Form 10-K.
Our SecondFirst Quarter 20212022 Performance
Revenues
Revenues
––Revenues increased $9.1$11.1 billion, or 92%77%, in the secondfirst quarter of 20212022 to $19.0$25.7 billion from $9.9$14.5 billion in the secondfirst quarter of 2020,2021, reflecting an operational increase of $8.5$11.9 billion, or 86%82%, as well as a favorablean unfavorable impact of foreign exchange of $637 million, or 6%. Excluding direct sales and alliance revenues of BNT162b2 of $7.8 billion, revenues increased 10% operationally, reflecting strong growth in Vyndaqel/Vyndamax, Eliquis, Prevnar 13/Prevenar 13, Inlyta, Xtandi, Biosimilars and the Hospital therapeutic area, partially offset by declines in Enbrel, Xeljanz and Chantix/Champix.
Revenues increased $13.6 billion, or 68%, in the first six months of 2021 to $33.6 billion from $19.9 billion in the first six months of 2020, reflecting an operational increase of $12.7 billion, or 64%, as well as the favorable impact of foreign exchange
of $921$778 million, or 5%. Excluding direct sales and alliance revenues of BNT162b2Comirnaty and sales of $11.3 billion,Paxlovid, revenues increased 9%2% operationally, reflecting strong growth in the Prevnar family in the U.S., Eliquis, Vyndaqel/Vyndamax, Inlyta, Xtandi, BiosimilarsOncology biosimilars and the Hospital therapeutic area,Ibrance internationally, partially offset by declines in Chantix/Champix, EnbrelXeljanz and Prevnar 13/Prevenar 13.Ibrance in the U.S.
Revenues in the first quarter of 2022 were unfavorably impacted by approximately $200 million as a result of the first quarter of 2022 having one fewer selling day in the U.S. and one fewer selling day in international markets as compared to the first quarter of 2021. This unfavorable impact is expected to reverse in the fourth quarter of 2022.
See the Analysis of the Condensed Consolidated Statements of Income––Revenues by Geography and Revenues––Selected Product Discussion sections for more information, including a discussion of key drivers of our revenue performance. For information regarding the primary indications or class of certain products, see Note 13B.13C.
Income from continuing operations before provisionContinuing Operations Before Provision/(Benefit) for taxesTaxes on income
Income––The increase of $3.6 billion in Income from continuing operations before provisionprovision/(benefit) for taxes on income of $3.4 billion in the secondfirst quarter of 2021,2022, compared to the same period in 2020,2021, was primarily attributable to higher revenues, lowerpartially offset by an increase in Restructuring charges and certain acquisition-related costs,Cost of sales, highernet losses on equity securities in the first quarter of 2022 versus net gains on equity securities higher net gains on asset disposalsin the first quarter of 2021, and lower interest expense, partially offset by higherincreases in Cost of sales,Acquired in-process research and development expenses higherand Research and development expenses, higher legal charges, higher Selling, informational and administrative expenses and lower income from collaborations.
The increase of $6.4 billion in Income from continuing operations before provision for taxes on income in the first six months of 2021, compared to the same period in 2020, was primarily attributable to higher revenues, highernet gains on equity securities, lower Restructuring charges and certain acquisition-related costs, higher net periodic benefit credits related to pension and postretirement plans, higher Consumer Healthcare JV equity method income, lower interest expense and higher net gains on asset disposals, partially offset by higher Cost of sales, higher Research and development expenses, higher Selling, informational and administrative expenses andhigher legal charges.expenses.
See the Analysis of the Condensed Consolidated Statements of Income within this MD&A and Note 4 for additional information.
For information on our tax provision and effective tax rate, see the ProvisionProvision/(Benefit) for Taxes on Income section within MD&A and Note 5.
Our Operating Environment
We, like other businesses in our industry, are subject to certain industry-specific challenges. These include, among others, the topics listed below, as well as in the Item 1. Business––Government Regulation and inPrice Constraints and Item 1A. Risk Factors sections,and the Overview of Our Performance, Operating Environment, Strategy and Outlook––Our Operating Environment section of the MD&Aof our 20202021 Form 10-K.
Intellectual Property Rights and Collaboration/Licensing Rights
––The loss, expiration or invalidation of intellectual property rights, patent litigation settlements with manufacturers and the expiration of co-promotion and licensing rights can have a material adverse effect on our revenues. Certain of our products have experienced patent-based expirations or loss of regulatory exclusivity in certain markets in the last few years, and we expect certain products to face significantly increased generic competition over the next few years. For example, the basic product patent for Chantix in the U.S. expired in November 2020. While multi-source generic competition for Chantix has not yet begun, it could commence at any time. Also, the basic product patent for Sutent in the U.S. will expire on August 15, 2021. While additional patent expiries will continue, we expect a moderate impact of reduced revenues due to patent expiries from 20212022 through 2025. Further, legal or regulatory action by various stakeholders or governments could potentially result in us not seeking intellectual property protection for or agreeing not to enforce or being restricted from enforcing intellectual property related to our products. For example, in May 2021, the Brazilian Supreme Court voted to invalidate Article 40 of Brazil’s Patent Law, which guaranteed a minimum 10-year patent term from patent grant, and to give retroactive effect to such decision. We continue to vigorously defend our patent rights against infringement, and we will continue to support efforts that strengthen worldwide recognition of patent rights while taking necessary steps to help ensure appropriate patient access.
For additional information on patent rights we consider most significant in relation to our business as a whole, see the Item 1. Business––Patents and Other Intellectual Property Rights section of our 20202021 Form 10-K. For a discussion of recent developments with respect to patent litigation, see Note 12A1.
Regulatory Environment/Pricing and Access––Government and Other Payer Group Pressures
The pricing of medicines and vaccines by pharmaceutical manufacturers and the cost of healthcare, which includes medicines, vaccines, medical services and hospital services, continues to be important to payers, governments, patients, and other stakeholders. Federal and state governments and––Governments globally, as well as private third-party payers in the U.S. continue to take action to manage the utilization of drugs and cost of drugs, including increasingly employing formularies to control costs by taking into account discounts in connection with decisions about formulary inclusion or favorable formulary placement. We consider a number of factors impacting the pricing of our medicines and vaccines. Within the U.S., we often engage with patients, doctors and healthcare plans. We also often provide significant discounts from the list price to insurers, including PBMs and MCOs. The price that patients pay in the U.S. for prescribed medicines and vaccines is ultimately set by healthcare providers and insurers.
Governments globally may use a variety of measures to control costs, including, among others, proposing pricing reform or legislation,employing formularies to control costs, cross country collaboration and procurement, price cuts, mandatory rebates, health technology assessments, forced localization as a condition of market access, “international reference pricing” (i.e., the practice of a country linking its regulated medicine prices to those of other countries), quality consistency evaluation processes and volume-based procurement. In the U.S., we expect to see continued focus by Congress and the Biden Administration on regulating pricing resulting in legislative and regulatory efforts designed to control costs. We anticipate that these and similar initiatives will continue to increase pricing pressures globally. For additional information, see the Item 1. Business––Pricing Pressures and Managed Care Organizations and ––Government Regulation and Price Constraints sections in our 20202021 Form 10-K and the Overview of Our Performance, Operating Environment, Strategy and Outlook––Our Operating Environment section of the MD&A in our 2021 Form 10-K.
Product Supply
––We periodically encounter supply delays, disruptions and shortages, including due to a voluntary recall of a product. In July 2021, Pfizer issued a voluntary recall in the U.S. for 12 lots of Chantix due to the presence of a nitrosamine, N-nitroso-varenicline, above the Pfizer-established acceptable daily intake level. Nitrosamines are impurities which are common in water and foods and everyone is exposed to some level of nitrosamines.product recalls. In response to requests from various regulatory authorities, manufacturers across the pharmaceutical industry, including Pfizer, have beenare evaluating their product portfolios for the potential for the presence or formation of nitrosamines. This has led to recalls, including our voluntary recall of Chantix in 2021 and additional voluntary recalls initiated for other products in 2022 due to the presence of nitrosamines in pharmaceuticalabove the applicable acceptable intake limit, and may lead to additional recalls or other market actions for Pfizer products. We are currently undertaking an evaluation of our entire portfolio. For information on our Chantix recall in 2021 and risks related to product manufacturing, see the Item 1A. Risk Factors––Product Manufacturing, Sales and Marketing Risks section of our 20202021 Form 10-K.
The Global Economic Environment
In addition to the industry-specific factors discussed above, we, like other businesses of our size and global extent of activities, are exposed to the economic cycle.cycles. For additional information, please see the Overview of Our Performance, Operating Environment, Strategy and Outlook––The Global Economic Environment section of the MD&A of our 20202021 Form 10-K.
Russia/Ukraine Conflict––Our global operations may be impacted by certain factors in the global economic environment including impacts of political or civil unrest or military action, including the conflict between Russia and Ukraine. To date, the financial impacts of the conflict have not been material to our consolidated financial statements. For both the fiscal year ended December 31, 2021 and the fiscal quarter ended April 3, 2022, the business of our Russia and Ukraine subsidiaries represented less than 1% of our consolidated revenues and assets. In March 2022, we announced certain steps we are taking in response to the conflict, which are being taken in addition to the company’s adherence to global sanctions. Consistent with our commitment to putting patients first, we are maintaining the supply of medicines to Russia, including the provision of needed medicines to patients already enrolled in clinical trials. Effective March 14, 2022, Pfizer is donating all profits of our Russian subsidiary to causes that provide direct humanitarian support to the people of Ukraine, in addition to the company’s ongoing efforts to support the humanitarian response in the region. Additionally, we will no longer initiate new clinical trials in Russia, will stop recruiting new patients in our ongoing clinical trials in the country, and will cease all future investments with local suppliers intended to build manufacturing capacity in Russia. While we are monitoring the effects of the armed conflict between Russia and Ukraine, the broader economic consequences of the conflict, including its potential future impact on our business, are currently difficult to predict. Regional instability, geopolitical shifts, potential additional sanctions and other restrictive measures against Russia, neighboring countries or allies of Russia, and any retaliatory measures taken by Russia, neighboring countries or allies of Russia, in response to such measures could adversely affect the global macroeconomic environment, our operations, currency exchange rates and financial markets, which could in turn adversely impact our business.
COVID-19 Pandemic––The continuation of the COVID-19 pandemic has impacted our business, operations and financial condition and results.
Our Response to COVID-19
We are committedPfizer has helped lead the global effort to confrontingconfront the public health challenge posed by theCOVID-19 pandemic by collaborating with industry partners,advancing a vision for industry-wide collaboration while making significant investments in breakthrough science and global regulators and academic institutions to develop potential approaches to prevent and treat COVID-19. We have made some important advances, including, among others:manufacturing.
•COVID-19 Vaccine Development ProgramComirnaty/BNT162b2:
◦The FDA has authorized the distribution and use of We have collaborated with BioNTech to jointly develop Comirnaty/BNT162b2, in the U.S.a mRNA-based coronavirus vaccine to help prevent COVID-19 for individuals 12 years of age and older under an EUA. BNT162b2 has not been approved or licensed byCOVID-19. For additional information, see the FDA. The EUA authorizes distribution and useProduct Developments section of this product subject to the conditions set forth in the EUA, and only for the duration of the declaration by the Department of Health & Human Services that circumstances exist justifying authorization of emergency use of drugs and biological products (such as BNT162b2) during the COVID-19 pandemic under Section 564 of the U.S. Federal Food, Drug and Cosmetic Act (the Declaration), or until revocation of the EUA by the FDA. The FDA has issued EUAs to certain other companies for products intended for the prevention or treatment of COVID-19 and may continue to do so during the duration of the Declaration. The FDA expects EUA holders to work towards submission of a BLA as soon as possible. In May 2021, we and BioNTech completed the rolling submission of the BLA seeking full approval for BNT162b2 in individuals 16 years and older. In July 2021, the FDA granted Priority Review designation for this BLA. The PDUFA goal date for this BLA is set for January 2022, but the FDA may potentially act sooner. BNT162b2 has been granted a CMA, EUA or temporary authorization in many other countries around the world.MD&A. We continue to study vaccines to help prevent COVID-19,evaluate our vaccine, including evaluatingfor additional pediatric and maternal indications, for BNT162b2, assessingand the short- and long-term efficacy of BNT162b2,Comirnaty. We are also studying vaccinesvaccine candidates to potentially prevent COVID-19 caused by new and emerging variants and potentially developing booster doses or an updated vaccine as needed.
◦Based on current projections, we and BioNTech expect to manufacture in total up to 3 billion doses by the end of December 2021, subject to continuous process improvements, expansion at current facilities and adding new suppliers and contract manufacturers. The companies have entered into agreements to supply pre-specified doses of BNT162b2Comirnaty in 2022 with multiple developed and emerging nationscountries around the world and are continuing to deliver doses of BNT162b2Comirnaty to governments under such agreements. We also signed agreements with the U.S., the EU, Israel and Canadamultiple countries to supply BNT162b2Comirnaty doses in 2022 and beyond2023 and are currently negotiating similar potential agreements with multiple other countries. We anticipate delivering at least two billion doses to low- and middle-income countries by the end of 2022—one billion that was delivered in 2021 and one billion expected to be delivered in 2022, with the possibility to increase those deliveries if more orders are placed by these countries for 2022. One billion of the aforementioned doses to low- and middle-income countries are being supplied to the U.S. government at a not-for-profit price to be donated to the world’s poorest nations at no charge to those countries.
◦As of July 28, 2021, based on the 2.1 billion doses that are expected to be delivered in 2021 under agreements that have been signed through mid-July 2021,May 3, 2022, we forecasted approximately $33.5$32 billion in revenues for Comirnaty in 2021 from BNT162b2,2022, with
gross profit to be split evenly with BioNTech. This forecast may be adjusted in the future as additional agreements are signed and as circumstances warrant, and does not include the additional 200 millionBioNTech, which includes doses we announced on July 23, 2021 that we will deliver to the U.S. Government, of which 110 million doses are expected to be delivered from October to December 2021. We anticipate that a significant amountin fiscal 2022 under contracts signed as of the remaining 2021 vaccine manufacturing capacity will be delivered to middle- and low-income countries where we price in line with income levels or at a not-for-profit price.mid-April 2022.
•COVID-19 Protease InhibitorsPaxlovid:
◦In JulyDecember 2021, we initiatedthe FDA authorized the emergency use of Paxlovid, a Phase 2/3 study to evaluate the efficacy, safety and tolerability of an investigational, novel oral antiviral therapeuticCOVID-19 treatment, for the treatment of mild-to-moderate COVID-19 PF-07321332, which is a SARS-CoV2-3CL protease inhibitor.in adults and pediatric patients (12 years of age and older weighing at least 40 kg [88 lbs]) with positive results of direct SARS-CoV-2 viral testing, and who are at high risk for progression to severe COVID-19, including hospitalization or death. Paxlovid has been granted an authorization or approval in many other countries. For additional information, see the Product Developments section of this MD&A.
◦We also have completedcontinue to evaluate Paxlovid in other populations, including in patients with a Phase 1b clinical trial for an intravenously administered investigational protease inhibitorconfirmed diagnosis of SARS-CoV-2 infection who are at standard risk (i.e., low risk of hospitalization or death) (Phase 2/3 EPIC-SR (Evaluation of Protease Inhibition for COVID-19 PF-07304814. Following recent communicationsin Standard Risk Patients)) and in non-hospitalized, symptomatic, pediatric patients with the FDA, we anticipate the initiationa confirmed diagnosis of a PhaseCOVID-19 who are at risk of progression to severe disease (Phase 2/3 study, EPIC-PEDS (Evaluation of PF-07304814Protease Inhibition for COVID-19 in Pediatric Patients)). In April 2022, Pfizer announced that the third quarterprimary endpoint of 2021.
Despite our significant investments and efforts, any of our ongoing development programs related to COVID-19 may not be successful asreducing the risk of failureconfirmed and symptomatic COVID-19 infection in adults who had been exposed to the virus through a household contact was not met in the Phase 2/3 EPIC-PEP (Evaluation of Protease Inhibition for COVID-19 in Post-Exposure Prophylaxis) study.
◦We have entered into agreements with multiple countries to supply pre-specified courses of Paxlovid, such as the U.S. and U.K. Additionally, we have signed a voluntary non-exclusive license agreement with the Medicines Patent Pool (MPP) to
share intellectual property related to our oral COVID-19 treatment to enable qualified generic medicine manufacturers worldwide to manufacture and supply generic versions of this treatment to 95 low- and middle-income countries, pending authorization or approval, covering up to approximately 53% of the world’s population. MPP has entered into sublicense agreements with 36 generic manufacturers. In addition, in March 2022, Pfizer entered into an agreement with UNICEF to supply up to 4 million treatment courses of Paxlovid to 95 low- and middle-income countries, pending authorization or approval.
◦Pfizer has capacity to manufacture up to 120 million treatment courses by the end of 2022 (and is significant, and there canon track to produce 30 million courses in the first half of 2022 with the ability to produce the remaining 90 million courses in the second half of 2022), depending on the global need, which will be no certainty these efforts will yield a successful productdriven by purchase agreements.
◦As of May 3, 2022, we forecasted approximately $22 billion of revenues for Paxlovid in 2022, which includes treatment courses expected to be delivered in fiscal 2022, primarily relating to supply contracts signed or that costs will ultimately be recouped.committed as of mid-April 2022.
Impact of COVID-19 on Our Business and Operations
As part of our on-going monitoring and assessment, we have made certain assumptions regarding the pandemic for purposes of our operational planning and financial projections, including assumptions regarding the duration, severity and the global macroeconomic impact of the pandemic, as well as COVID-19 vaccine and oral COVID-19 treatment revenues, supply and contracts, which remain dynamic. Despite careful tracking and planning, we are unable to accurately predict the extent of the impact of the pandemic on our business, operations and financial condition and results due to the uncertainty of future developments. We are focused on all aspects of our business and are implementing measures aimed at mitigating issues where possible, including by using digital technology to assist in operations for our commercial, manufacturing, R&D and corporate enabling functions globally.
As discussed in our 20202021 Form 10-K, apart from our introduction of Comirnaty/BNT162b2 and Paxlovid, our business and operations were impacted in 2020 by the pandemic in various ways; certain of those impacts have continued in 2021.2022. For additional detail and discussion on the impact of the COVID-19 pandemic on certain of our products, sales and marketing, supply chain and clinical trials, see the Analysis of the Condensed Consolidated Statements of Income—Revenues by Geography andRevenues—Selected Product Discussion sections within this MD&A. In 2021, we have continued not to see a significant disruption to our supply chain to date,&A and allthe Overview of Our Performance, Operating Environment, Strategy and Outlook—The Global Economic Environment—COVID-19 Pandemic section of the MD&A of our manufacturing sites globally have continued to operate at or near normal levels. However, we are seeing an increase in overall demand in the industry for certain components and raw materials potentially constraining available supply, which could have a future impact on our business. We are continuing to monitor and implement mitigation strategies in an effort to reduce any potential impact.2021 Form 10-K.
We will continue to pursue efforts to maintain the continuity of our operations while monitoring for new developments related to the pandemic. Future developments could result in additional favorable or unfavorable impacts on our business, operations or financial condition and results. If we experience significant disruption in our manufacturing or supply chains or significant disruptions in clinical trials or other operations, or if demand for our products is significantly reduced as a result of the COVID-19 pandemic, or if demand for our COVID-19 vaccine or oral COVID-19 treatment is reduced or no longer exists, we could experience a material adverse impact on our business, operations and financial condition and results.
For additional information, please see the Item 1A. Risk Factors—COVID-19 Pandemic section and the Overview of Our Performance, Operating Environment, Strategy and Outlook section of the MD&A of our 20202021 Form 10-K.
SIGNIFICANT ACCOUNTING POLICIES AND APPLICATION OF CRITICAL ACCOUNTING ESTIMATES AND ASSUMPTIONS
For a description of our significant accounting policies, see Note 1 in our 20202021 Form 10-K. Of these policies, the following are considered critical to an understanding of our consolidated financial statements as they require the application of the most subjective and the most complex judgments: Acquisitions (Note 1D1E); Fair Value (Note 1E1F); Revenues (Note 1G1H); Asset Impairments (Note 1L1M); Tax Assets and Liabilities and Income Tax Contingencies (Note 1P1Q); Pension and Postretirement Benefit Plans (Note 1Q1R); and Legal and Environmental Contingencies (Note 1R1S).
For a discussion about the critical accounting estimates and assumptions impacting our consolidated financial statements, see the Significant Accounting Policies and Application of Critical Accounting Estimates and Assumptions section within MD&A in our 20202021 Form 10-K. See also Note 1C1D in our 20202021 Form 10-K for a discussion about the risks associated with estimates and assumptions.
For a discussion of a recently adopted accounting standard, a change in accounting principle related to our pension and postretirement plans, and significant accounting policies, see NotesNote 1B 1C and. For a discussion of presentation changes for Acquired in-process research and development expenses, see Note 1D.
ANALYSIS OF THE CONDENSED CONSOLIDATED STATEMENTS OF INCOME
Revenues by Geography
| The following presents worldwide revenues by geography: | The following presents worldwide revenues by geography: | The following presents worldwide revenues by geography: |
| | Three Months Ended | | Three Months Ended |
| | | Worldwide | | U.S. | | International | | World-wide | | U.S. | | Inter-national | | | Worldwide | | U.S. | | International | | World-wide | | U.S. | | Inter-national |
(MILLIONS) | (MILLIONS) | | July 4, 2021 | | June 28, 2020 | | July 4, 2021 | | June 28, 2020 | | July 4, 2021 | | June 28, 2020 | | % Change in Revenues | (MILLIONS) | | April 3, 2022 | | April. 4, 2021 | | April 3, 2022 | | April. 4, 2021 | | April 3, 2022 | | April. 4, 2021 | | % Change in Revenues |
Operating segments: | | Operating segments: | | | | | | | | | | | | | | |
Biopharma | | Biopharma | | $ | 25,323 | | | $ | 14,125 | | | $ | 8,816 | | | $ | 7,378 | | | $ | 16,507 | | | $ | 6,747 | | | 79 | | | 19 | | | 145 | |
Pfizer CentreOne | | Pfizer CentreOne | | 338 | | | 391 | | | 102 | | | 153 | | | 236 | | | 238 | | | (13) | | | (33) | | | (1) | |
Total revenues | Total revenues | | $ | 18,977 | | | $ | 9,864 | | | $ | 7,593 | | | $ | 5,113 | | | $ | 11,384 | | | $ | 4,751 | | | 92 | | | 48 | | | * | Total revenues | | $ | 25,661 | | | $ | 14,516 | | | $ | 8,918 | | | $ | 7,530 | | | $ | 16,743 | | | $ | 6,985 | | | 77 | | | 18 | | | 140 | |
| | | Six Months Ended | |
| | Worldwide | | U.S. | | International | | World-wide | | U.S. | | Inter-national | |
(MILLIONS) | | July 4, 2021 | | June 28, 2020 | | July 4, 2021 | | June 28, 2020 | | July 4, 2021 | | June 28, 2020 | | % Change in Revenues | |
Total revenues | | $ | 33,559 | | | $ | 19,947 | | | $ | 15,190 | | | $ | 10,403 | | | $ | 18,369 | | | $ | 9,544 | | | 68 | | | 46 | | | 92 | | |
| |
* Calculation is not meaningful or results are equal to or greater than 100%.
SecondFirst Quarter of 20212022 vs. SecondFirst Quarter of 20202021
| | | | | | | | | | | | | | | | | | | | |
The following provides an analysis of the worldwide change in revenues by geographic areas in the second quarter of 2021: |
| | Three Months Ended July 4, 2021 |
(MILLIONS) | | Worldwide | | U.S. | | International |
Operational growth/(decline): | | | | | | |
Growth from BNT162b2, Vyndaqel/Vyndamax, Eliquis, Prevnar 13/Prevenar 13, Inlyta, Xtandi, Ibrance, Biosimilars and the Hospital therapeutic area, partially offset by decline from Xeljanz. See the Analysis of the Condensed Consolidated Statements of Income––Revenues––Selected Product Discussion within MD&A for additional analysis | | $ | 8,613 | | | $ | 2,515 | | | $ | 6,098 | |
Lower revenues for Enbrel and Chantix/Champix. The decrease for Enbrel internationally primarily reflects continued biosimilar competition in most developed Europe markets and Japan, which is expected to continue. The decrease in Chantix/Champix was driven by the U.S. and primarily reflects a negative impact on available supply related to the voluntary recall of certain lots of product following the discovery of the presence of a nitrosamine, N-nitroso-varenicline, above the Pfizer-established acceptable daily intake level and a hold on distribution of new product pending additional testing, as well as the negative impact of the COVID-19 pandemic resulting in a decline in patient visits to doctors for preventative health purposes and the loss of patent protection in the U.S. in November 2020 | | (119) | | | (41) | | | (77) | |
Other operational factors, net | | (18) | | | 6 | | | (24) | |
Operational growth/(decline), net | | 8,476 | | | 2,480 | | | 5,996 | |
| | | | | | |
Favorable impact of foreign exchange | | 637 | | | — | | | 637 | |
Revenues increase/(decrease) | | $ | 9,113 | | | $ | 2,480 | | | $ | 6,633 | |
| | | | | | | | | | | | | | | | | | | | |
The following provides an analysis of the change in worldwide revenues by geographic areas in the first quarter of 2022: |
| | Three Months Ended April 3, 2022 |
(MILLIONS) | | Worldwide | | U.S. | | International |
Operational growth/(decline): | | | | | | |
Growth from Comirnaty, Paxlovid, Prevnar family, Eliquis, Vyndaqel/Vyndamax, Biosimilars, Ibrance and Inlyta, partially offset by a decline from Xeljanz, while Xtandi was flat. See the Analysis of the Condensed Consolidated Statements of Income––Revenues––Selected Product Discussion within MD&A for additional analysis | | $ | 12,367 | | | $ | 1,764 | | | $ | 10,603 | |
Decline from PC1. See the Analysis of the Condensed Consolidated Statements of Income––Revenues––Selected Product Discussion within MD&A for additional analysis | | (43) | | | (51) | | | 8 | |
Lower revenues for Chantix/Champix, Sutent and Enbrel: •The decrease in Chantix/Champix was driven by the ongoing global pause in shipments of Chantix due to the presence of N-nitroso-varenicline above an acceptable level of intake set by various global regulators, the ultimate timing for resolution of which may vary by country •The decrease for Sutent primarily reflects lower volume demand in the U.S. resulting from its loss of exclusivity in August 2021, as well as continued erosion as a result of increased competition in certain international developed markets •The decrease for Enbrel internationally primarily reflects continued biosimilar competition, which is expected to continue | | (314) | | | (204) | | | (109) | |
Other operational factors, net | | (88) | | | (122) | | | 34 | |
Operational growth, net | | 11,923 | | | 1,387 | | | 10,536 | |
| | | | | | |
Unfavorable impact of foreign exchange | | (778) | | | — | | | (778) | |
Revenues increase/(decrease) | | $ | 11,145 | | | $ | 1,387 | | | $ | 9,758 | |
Emerging markets revenues increased $1.9$4.5 billion, or 101%161%, in the secondfirst quarter of 20212022 to $3.8$7.4 billion from $1.9$2.8 billion in the secondfirst quarter of 2020,2021, reflecting an operational increase of $1.8$4.8 billion, or 94%169%, and a favorablean unfavorable impact from foreign exchange of approximately 7%8%. The operational increase in emerging markets was primarily driven by growth from Comirnaty and revenues from BNT162b2 and growth from Eliquis.Paxlovid.
First Six Months of 2021 vs. First Six Months of 2020
| | | | | | | | | | | | | | | | | | | | |
The following provides an analysis of the worldwide change in revenues by geographic areas in the first six months of 2021: |
| | Six Months Ended July 4, 2021 |
(MILLIONS) | | Worldwide | | U.S. | | International |
Operational growth/(decline): | | | | | | |
Growth from BNT162b2, Eliquis, Vyndaqel/Vyndamax, Inlyta, Xtandi, Xeljanz, Biosimilars and the Hospital therapeutic area, partially offset by decline from Prevnar 13/Prevenar 13, while Ibrance was flat. See the Analysis of the Condensed Consolidated Statements of Income––Revenues––Selected Product Discussion within MD&A for additional analysis | | $ | 12,952 | | | $ | 4,899 | | | $ | 8,054 | |
Lower revenues for Chantix/Champix and Enbrel. The decrease in Chantix/Champix was driven by the U.S. and primarily reflects the negative impact of the COVID-19 pandemic resulting in a decline in patient visits to doctors for preventative health purposes and the loss of patent protection in the U.S. in November 2020, as well as a negative impact on available supply related to the voluntary recall of certain lots of product following the discovery of the presence of a nitrosamine, N-nitroso-varenicline, above the Pfizer-established acceptable daily intake level and a hold on distribution of new product pending additional testing. The decrease for Enbrel internationally primarily reflects continued biosimilar competition in most developed Europe markets and Japan, which is expected to continue | | (211) | | | (87) | | | (125) | |
Other operational factors, net | | (50) | | | (25) | | | (26) | |
Operational growth/(decline), net | | 12,691 | | | 4,787 | | | 7,903 | |
| | | | | | |
Favorable impact of foreign exchange | | 921 | | | — | | | 921 | |
Revenues increase/(decrease) | | $ | 13,612 | | | $ | 4,787 | | | $ | 8,825 | |
Emerging markets revenues increased $2.6 billion, or 63%, in the first six months of 2021 to $6.6 billion from $4.1 billion in the first six months of 2020, reflecting an operational increase of $2.5 billion, or 61%, and a favorable impact from foreign exchange of approximately 2%. The operational increase in emerging markets was primarily driven by revenues from BNT162b2 and growth from Eliquis.
Revenue Deductions
––Our gross product revenues are subject to a variety of deductions, which generally are estimated and recorded in the same period that the revenues are recognized. These deductions represent estimates of related obligations and, as such, knowledge and judgment are required when estimating the impact of these revenue deductions on gross sales for a reporting period. Historically, adjustments to these estimates to reflect actual results or updated expectations, have not been material to our overall business and generally have been less than 1% of revenues. Product-specific rebates, however, can have a significant impact on year-over-year individual product revenue growth trends.
| | | | | | | | | | | | | | | | | | | | | | | | | | |
The following presents information about revenue deductions: |
| | Three Months Ended | | Six Months Ended |
(MILLIONS) | | July 4, 2021 | | June 28, 2020 | | July 4, 2021 | | June 28, 2020 |
Medicare rebates | | $ | 182 | | | $ | 143 | | | $ | 371 | | | $ | 327 | |
Medicaid and related state program rebates | | 306 | | | 283 | | | 652 | | | 580 | |
Performance-based contract rebates | | 788 | | | 655 | | | 1,541 | | | 1,269 | |
Chargebacks | | 1,518 | | | 1,033 | | | 2,949 | | | 2,064 | |
Sales allowances | | 1,213 | | | 864 | | | 2,357 | | | 1,886 | |
Sales returns and cash discounts | | 235 | | | 217 | | | 459 | | | 439 | |
Total | | $ | 4,243 | | | $ | 3,194 | | | $ | 8,329 | | | $ | 6,565 | |
| | | | | | | | | | | | | | | | | | |
The following presents information about revenue deductions: |
| | | | Three Months Ended |
(MILLIONS) | | | | | | April 3, 2022 | | April 4, 2021 |
Medicare rebates | | | | | | $ | 201 | | | $ | 189 | |
Medicaid and related state program rebates | | | | | | 241 | | | 346 | |
Performance-based contract rebates | | | | | | 806 | | | 753 | |
Chargebacks | | | | | | 1,737 | | | 1,431 | |
Sales allowances | | | | | | 1,204 | | | 1,143 | |
Sales returns and cash discounts | | | | | | 270 | | | 224 | |
Total | | | | | | $ | 4,458 | | | $ | 4,086 | |
Revenue deductions are primarily a function of product sales volume, mix of products sold, contractual or legislative discounts and rebates.
For information on our accruals for revenue deductions, including the balance sheet classification of these accruals, see Note 1D.1C.
Revenues––Selected Product Discussion
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(MILLIONS) | | | | | | Revenue | | % Change | | |
Product | | Period | | Global Revenues | | Region | | July 4, 2021 | | June 28, 2020 | | Total | | Oper. | | Operational Results Commentary |
BNT162b2(a) | | QTD | | $7,838
* | | U.S. | | $ | 2,034 | | | $ | — | | | * | | | | Driven by global uptake, following a CMA, EUA or temporary authorization. |
Int’l. | | 5,804 | | | — | | | * | | * | |
Worldwide | | $ | 7,838 | | | $ | — | | | * | | * | |
YTD | $11,300
* | U.S. | | $ | 4,072 | | | $ | — | | | * | | | |
Int’l. | | 7,228 | | | — | | | * | | * | |
Worldwide | | $ | 11,300 | | | $ | — | | | * | | * | |
Eliquis | QTD | $1,481
Up 13%
(operationally) | U.S. | | $ | 831 | | | $ | 722 | | | 15 | | | | | QTD and YTD growth led by the U.S. and emerging markets, driven primarily by continued increased adoption in non-valvular atrial fibrillation and oral anti-coagulant market share gains. YTD was also impacted by a favorable adjustment related to the Medicare “coverage gap” provision resulting from lower than previously expected discounts in prior periods. |
Int’l. | | 650 | | | 550 | | | 18 | | | 10 | | |
Worldwide | | $ | 1,481 | | | $ | 1,272 | | | 16 | | | 13 | | |
YTD | $3,124
Up 19%
(operationally) | U.S. | | $ | 1,812 | | | $ | 1,527 | | | 19 | | | | |
Int’l. | | 1,312 | | | 1,045 | | | 26 | | | 19 | | |
Worldwide | | $ | 3,124 | | | $ | 2,572 | | | 21 | | | 19 | | |
Ibrance | QTD | $1,404
Up 2% (operationally) | U.S. | | $ | 862 | | | $ | 927 | | | (7) | | | | | QTD growth driven by accelerating demand internationally as the delays in diagnosis and treatment initiations caused by COVID-19 show signs of recovery across several international markets, partially offset by a decline in the U.S., which despite maintaining a strong leadership position within the CDK 4/6 class with 73% share of first-line new patient starts, reflects an increase in the proportion of patients accessing Ibrance through our Patient Assistance Program. YTD was flat as accelerating demand internationally was offset by a decline in the U.S., as described above. |
Int’l. | | 542 | | | 422 | | | 28 | | | 21 | | |
Worldwide | | $ | 1,404 | | | $ | 1,349 | | | 4 | | | 2 | | |
YTD | $2,657
Flat
(operationally) | U.S. | | $ | 1,656 | | | $ | 1,779 | | | (7) | | | | |
Int’l. | | 1,002 | | | 819 | | | 22 | | | 16 | | |
Worldwide | | $ | 2,657 | | | $ | 2,598 | | | 2 | | | — | |
Prevnar 13/ Prevenar 13 | QTD | $1,241
Up 9%
(operationally) | U.S. | | $ | 642 | | | $ | 481 | | | 34 | | | | | QTD growth primarily resulting from: •U.S. growth in the pediatric indication, primarily due to higher levels of healthcare activity and wellness visits compared to the prior-year quarter, which was heavily impacted by COVID-19-related mobility restrictions and limitations, as well as favorable timing of government purchases, partially offset by lower year-over-year birth rates(b); and •U.S. growth in the adult indication, primarily due to higher levels of healthcare activity and wellness visits compared to the prior-year quarter, as described above, partially offset by the impact of a lower remaining eligible unvaccinated population, This growth was partially offset by: •decline in developed Europe, reflecting significantly increased adult demand in the prior-year quarter in Germany and certain other markets resulting from greater vaccine awareness for respiratory illnesses due to the COVID-19 pandemic.
YTD decline primarily resulting from: •impact of the revised ACIP recommendation for the adult indication to shared clinical decision making, which means the decision to vaccinate should be made at the individual level between healthcare providers and their patients, as well as the continued impact of a lower remaining eligible adult population; and •decline in developed Europe, reflecting significantly increased adult demand in the prior-year in Germany and certain other markets resulting from greater vaccine awareness for respiratory illnesses due to the COVID-19 pandemic, partially offset by: •U.S. growth in the pediatric indication due to the factors discussed above. |
Int’l. | | 599 | | | 636 | | | (6) | | | (9) | |
Worldwide | | $ | 1,241 | | | $ | 1,116 | | | 11 | | | 9 | |
YTD | $2,524
Down 3%
(operationally) | U.S. | | $ | 1,280 | | | $ | 1,275 | | | — | | | |
Int’l. | | 1,244 | | | 1,291 | | | (4) | | | (6) | | |
Worldwide | | $ | 2,524 | | | $ | 2,566 | | | (2) | | | (3) | | |
Biopharma
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | Revenue | | | | |
(MILLIONS) | | | | | Three Months Ended | % Change | |
Product | | | | Global Revenues | | Region | | April 3, 2022 | | April. 4, 2021 | | Total | | Oper. | | Operational Results Commentary |
Comirnaty(a) | | | | $13,227
* | | U.S. | | $ | 2,314 | | | $ | 2,038 | | | 14 | | | | | Driven by global uptake including pediatric and booster doses following a growing number of regulatory approvals and temporary authorizations. |
Int’l. | | 10,913 | | | 1,424 | | | * | | * |
Worldwide | | $ | 13,227 | | | $ | 3,462 | | | * | | * |
| | | | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
Eliquis | | $1,793
Up 12%
(operationally) | U.S. | | $ | 1,080 | | | $ | 981 | | | 10 | | | | | Global growth driven primarily by continued oral anti-coagulant adoption and market share gains in non-valvular atrial fibrillation, partially offset by the non-recurrence of an $80 million favorable adjustment related to the Medicare “coverage gap” provision recorded in the first quarter of 2021. |
Int’l. | | 713 | | | 662 | | | 8 | | | 14 | |
Worldwide | | $ | 1,793 | | | $ | 1,643 | | | 9 | | | 12 | |
| | | | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
Prevnar family | | $1,565
Up 23%
(operationally) | U.S. | | $ | 1,014 | | | $ | 638 | | | 59 | | | | | Growth driven by strong retail and wholesaler stocking in the U.S. of Prevnar 20 for the adult indication and favorable timing of government purchases of Prevnar 13 for the pediatric indication, partially offset by declines in the Prevnar 13 adult indication internationally due to disruptions to healthcare activity related to COVID-19, including the continued prioritization of COVID-19 vaccinations and booster doses. |
| Int’l. | 551 | | 646 | | (15) | | (12) | |
| Worldwide | $ | 1,565 | | $ | 1,284 | | 22 | | 23 | |
Paxlovid | | $1,470
*
| U.S. | | $ | 1,015 | | | $ | — | | | * | | * | | Driven by the U.S. launch in December 2021 and international launches in late 2021 and early 2022 following regulatory approvals or temporary authorizations. |
| Int’l. | | 455 | | — | | | * | | * |
| Worldwide | | $ | 1,470 | | $ | — | | | * | | * |
Ibrance | | $1,237
Up 1% (operationally) | U.S. | | $ | 753 | | | $ | 794 | | | (5) | | | | | Growth driven primarily by accelerating demand internationally as the delays in diagnosis and treatment initiations caused by the COVID-19 pandemic show signs of recovery across several international markets, partially offset by a decline in the U.S., primarily driven by an increase in the proportion of patients accessing Ibrance through our Patient Assistance Program. |
Int’l. | | 484 | | 460 | | | 5 | | | 12 | |
Worldwide | | $ | 1,237 | | $ | 1,254 | | | (1) | | | 1 | |
| | | | | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
Vyndaqel/ Vyndamax | | | | $612
Up 41%
(operationally) | | U.S. | | $ | 265 | | | $ | 206 | | | 29 | | | | | Growth primarily driven by continued strong uptake of the ATTR-CM indication in developed Europe, the U.S. and Japan. |
| | Int’l. | | 347 | | 247 | | | 41 | | | 52 | |
| | Worldwide | | $ | 612 | | $ | 453 | | | 35 | | | 41 | |
Xeljanz | | | | $372
Down 29%
(operationally) | | U.S. | | $ | 203 | | | $ | 332 | | | (39) | | | | | Decline driven primarily by decreased prescription volumes globally resulting from ongoing shifts in prescribing patterns related to JAK class label changes and, to a lesser extent, unfavorable wholesaler inventory buying patterns and declines in net price in the U.S. due to unfavorable changes in channel mix. |
Int’l. | 169 | | 206 | | | (18) | | | (13) | |
Worldwide | $ | 372 | | $ | 538 | | | (31) | | | (29) | |
| | | | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
Xtandi | | $268
Flat
(operationally) | U.S. | | $ | 268 | | | $ | 267 | | | — | | | | Performance driven by consistent demand across the mCRPC, nmCRPC and mCSPC indications, offset primarily by a lag in new patient starts as a consequence of delays in diagnosis and treatment due to COVID-19. |
Int’l. | — | | — | | — | — |
Worldwide | $ | 268 | | $ | 267 | | — | — |
| | | | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
Inlyta | | $234
Up 4%
(operationally) | U.S. | | $ | 140 | | | $ | 141 | | | (1) | | | | | Growth primarily reflects continued adoption in emerging markets and developed Europe of combinations of certain immune checkpoint inhibitors and Inlyta for the first-line treatment of patients with advanced RCC. |
Int’l. | 94 | | | 88 | | | 7 | | | 13 | |
Worldwide | $ | 234 | | | $ | 229 | | | 2 | | | 4 | |
| | | | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
Biosimilars | | $605
Up 16%
(operationally) | U.S. | | $ | 436 | | | $ | 327 | | | 33 | | | | | Growth mainly driven by oncology biosimilars primarily due to strong U.S. growth of Zirabev, Ruxience and Retacrit, partially offset by decreases in Inflectra globally as a result of competitive pressures for certain biosimilars. |
Int’l. | 169 | | | 203 | | | (17) | | | (11) | |
Worldwide | $ | 605 | | | $ | 530 | | | 14 | | | 16 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(MILLIONS) | | | | | | Revenue | | % Change | | |
Product | | Period | | Global Revenues | | Region | | July 4, 2021 | | June 28, 2020 | | Total | | Oper. | | Operational Results Commentary |
Xeljanz | | QTD | | $586
Down 9%
(operationally) | | U.S. | | $ | 390 | | | $ | 458 | | | (15) | | | | | QTD decline driven by the U.S., despite 2% year-over-year growth in U.S. prescription volume, reflecting an unfavorable change in channel mix toward lower-priced channels and continued investments to improve formulary positioning and unlock access to additional patient lives, as well as a negative impact on new patient starts resulting from an ongoing review by the FDA of safety data from the post-marketing ORAL Surveillance study of Xeljanz in subjects with rheumatoid arthritis who were 50 years of age or older and had at least one additional cardiovascular risk factor. This decline was partially offset by operational growth internationally mainly driven by continued uptake in the UC indication in certain developed markets. YTD growth reflects continued uptake in the RA and UC indications in certain international markets, partially offset by the U.S., as described above. |
Int’l. | 195 | | | 177 | | | 10 | | | 5 | | |
Worldwide | $ | 586 | | | $ | 635 | | | (8) | | | (9) | | |
YTD | $1,124
Up 2%
(operationally) | U.S. | | $ | 722 | | | $ | 744 | | | (3) | | | | |
Int’l. | | 402 | | | 343 | | | 17 | | | 13 | | |
Worldwide | | $ | 1,124 | | | $ | 1,086 | | | 3 | | | 2 | | |
Vyndaqel/ Vyndamax | QTD | $501
Up 77%
(operationally) | U.S. | | $ | 225 | | | $ | 145 | | | 54 | | | | | Primarily driven by continued strong uptake of the ATTR-CM indication in developed Europe, the U.S. and Japan. |
Int’l. | 276 | | | 131 | | * | * |
Worldwide | $ | 501 | | | $ | 277 | | 81 | | 77 | |
YTD | $953
Up 82%
(operationally) | U.S. | | $ | 430 | | | $ | 272 | | | 58 | | | | |
Int’l. | | 523 | | | 236 | | | * | | * | |
Worldwide | | $ | 953 | | | $ | 508 | | | 88 | | | 82 | | |
Xtandi | QTD | $303
Up 14%
(operationally) | U.S. | | $ | 303 | | | $ | 266 | | | 14 | | | | | Primarily driven by strong demand across the mCRPC, nmCRPC and mCSPC indications. |
Int’l. | — | | | — | | — | — |
Worldwide | $ | 303 | | | $ | 266 | | 14 | | 14 | |
YTD | $570
Up 20%
(operationally) | U.S. | | $ | 570 | | | $ | 475 | | | 20 | | | | |
Int’l. | | — | | | — | | | — | | — | |
Worldwide | | $ | 570 | | | $ | 475 | | | 20 | | | 20 | | |
Inlyta | QTD | $257
Up 29%
(operationally) | U.S. | | $ | 155 | | | $ | 132 | | | 17 | | | | | Primarily reflecting increased adoption in the U.S. and developed Europe of combinations of certain immune checkpoint inhibitors and Inlyta for the first-line treatment of patients with advanced RCC. |
Int’l. | 102 | | | 63 | | | 62 | | | 53 | | |
Worldwide | $ | 257 | | | $ | 195 | | | 32 | | | 29 | | |
YTD | $486
Up 31%
(operationally) | U.S. | | $ | 296 | | | $ | 248 | | | 20 | | | | |
Int’l. | | 190 | | | 116 | | | 63 | | | 55 | | |
Worldwide | | $ | 486 | | | $ | 364 | | | 34 | | | 31 | | |
Biosimilars | QTD | $559
Up 88%
(operationally) | U.S. | | $ | 363 | | | $ | 161 | | | * | | | | Primarily driven by recent oncology monoclonal antibody biosimilar launches globally and continued growth from Retacrit in the U.S. |
Int’l. | 195 | | | 128 | | | 52 | | | 39 | | |
Worldwide | $ | 559 | | | $ | 289 | | | 93 | | | 88 | | |
YTD | $1,089
Up 83%
(operationally) | U.S. | | $ | 691 | | | $ | 328 | | | * | | | |
Int’l. | | 398 | | | 250 | | | 59 | | | 47 | | |
Worldwide | | $ | 1,089 | | | $ | 578 | | | 88 | | | 83 | | |
Hospital | QTD | $2,259
Up 17%
(operationally) | U.S. | | $ | 833 | | | $ | 830 | | | — | | | | Primarily driven by Pfizer CentreOne, our contract manufacturing operation, reflecting manufacturing of legacy Upjohn products for Viatris under manufacturing and supply agreements, certain BNT162b2 manufacturing activities performed on behalf of BioNTech and remdesivir for Gilead Sciences Inc., as well as growth from recent anti-infective product launches in international markets, partially offset by a decline in U.S. sales of certain sterile injectable products utilized in the intubation and mechanical ventilation of patients being treated for COVID-19 due to high demand for these products in the comparable periods. |
Int’l. | 1,426 | | | 1,032 | | | 38 | | | 30 | | |
Worldwide | $ | 2,259 | | | $ | 1,863 | | | 21 | | | 17 | | |
YTD | $4,602
Up 13%
(operationally) | U.S. | | $ | 1,738 | | | $ | 1,721 | | | 1 | | | | |
Int’l. | | 2,863 | | | 2,231 | | | 28 | | | 22 | | |
Worldwide | | $ | 4,602 | | | $ | 3,951 | | | 16 | | | 13 | | |
Pfizer CentreOne | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | Revenue | | | | |
(MILLIONS) | | | | | | Three Months Ended | | % Change | | |
Operating Segment | | Global Revenues | | Region | | April 3, 2022 | | April. 4, 2021 | | Total | | Oper. | | Operational Results Commentary |
PC1 | | $338
Down 11%
(operationally) | | U.S. | | $ | 102 | | | $ | 153 | | | (33) | | | | | Decline is driven by lower manufacturing of divested products under manufacturing and supply agreements and COVID-19 manufacturing activities performed on behalf of customers, partially offset by timing of Comirnaty supply to BioNTech. |
Int’l. | 236 | | | 238 | | | (1) | | | 3 | | |
Worldwide | $ | 338 | | | $ | 391 | | | (13) | | | (11) | | |
(a)BNT162b2Comirnaty includes direct sales and alliance revenues related to sales of the Pfizer-BioNTech COVID-19 vaccine, which are recorded within our Vaccines therapeutic area. It does not include revenues for certain BNT162b2Comirnaty-related manufacturing activities performed on behalf of BioNTech, related to the COVID-19 vaccine, which are included in the Pfizer CentreOne contract development and manufacturing operation withinoperation. Revenues related to these manufacturing activities totaled $47 million for the Hospital area.
(b)The U.S. birth rate decline is 4% compared to 2020 levels, according to Demographic Intelligence.first quarter of 2022.
* Calculation is not meaningful or results are equal to or greater than 100%.
See the Item 1. Business—Patents and Other Intellectual Property Rights section of our 20202021 Form 10-K for information regarding the expiration of various patent rights, Note 12 for a discussion of recent developments concerning patent and product litigation relating to certain of the products discussed above, and Note 13B13C for information regarding the primary indications or class of the selected products discussed.
Product Developments
A comprehensive update of Pfizer’s development pipeline was published as of July 28, 2021May 3, 2022 and is available at www.pfizer.com/science/drug-product-pipeline. It includes an overview of our research and a list of compounds in development with targeted indication and phase of development, as well as mechanism of action for some candidates in Phase 1 and all candidates from Phase 2 through registration.
The following provides information about significant marketing application-related regulatory actions by, and filings pending with, the FDA and regulatory authorities in the EU and Japan.
The table below includes only approvals for products that have occurred in the last twelve months and generally does not include approvals that may have occurred prior to that time. The table includes filings with regulatory decisions pending (even if the filing occurred outside of the last twelve-month period).
| | | | | | | | | | | | | | |
PRODUCT | DISEASE AREA | APPROVED/FILED* |
U.S. | EU | JAPAN |
Comirnaty/BNT162b2 PF-07302048 (COVID-19 Vaccine)(PF-07302048)(a)
| Immunization to prevent COVID-19 (16 years of age and older) | EUABLA
Dec.Aug.
20202021
| CMA Dec. 2020 | Approved Feb. 2021 |
Immunization to prevent COVID-19 (12-15 years of age) | EUA May 2021 | CMA May 2021 | Approved May 2021 |
Immunization to prevent COVID-19 (booster) | BavencioEUA
(avelumab)(b)Sep.
2021 | First-line maintenance urothelial cancerCMA
Oct. 2021 | Approved Nov. 2021 |
Immunization to prevent COVID-19 (5-11 years of age) |
EUA
Oct. 2021 | CMA Nov. 2021 | Approved Jan. 2021
| Approved
Feb.
20212022
|
NyvepriaCibinqo
(pegfilgrastim-apgf)(abrocitinib) | Neutropenia in patients undergoing cancer chemotherapy (biosimilar) |
| Approved
Nov.
2020
| |
Braftovi (encorafenib)(c)
| Second or third-line BRAFv600E-mutant mCRC (combination with Erbitux® (cetuximab))
|
|
| Approved
Nov.
2020
|
Braftovi (encorafenib) and Mektovi (binimetinib)(c)
| Second or third-line BRAFV600E-mutant mCRC (combination with Erbitux® (cetuximab))
| | | Approved
Nov.
2020
|
Xtandi
(enzalutamide)(d)
| mCSPC | | Approved
April
2021
|
|
abrocitinib (PF-04965842)(e)
| Atopic dermatitis | FiledApproved
Oct.Jan.
20202022
| Filed
Oct.
2020
| FiledApproved
Dec. 20202021
| Approved Sep. 2021 |
Infliximab Pfizer (infliximab) | Ankylosing spondylitis (biosimilar) | | | Approved
Oct.
2020
|
Bevacizumab Pfizer (bevacizumab) | NSCLC (biosimilar) | | | Approved
Sept.
2020
|
tanezumab(f)
| Chronic pain due to moderate-to-severe osteoarthritis | Filed
March
2020
| Filed
March
2020
| Filed
Aug.
2020
|
Xeljanz (tofacitinib)(e)
| Ankylosing spondylitis | FiledApproved
Aug.Dec.
20202021
| FiledApproved
Feb.Nov.
2021 | |
Myfembree (relugolix fixed dose combination)(g)(b) | Uterine fibroids (combination with estradiol and norethindrone acetate) | Approved May 2021 | | |
Endometriosis (combination with estradiol and norethindrone acetate) | LorbrenaFiled
Sep. 2021 | | |
Lorbrena/Lorviqua (lorlatinib) | First- lineFirst-line ALK-positive NSCLC | Approved Mar. 2021 | FiledApproved
Feb.Jan.
20212022
| FiledApproved
Dec.Nov.
20202021
|
somatrogonNgenla
(PF-06836922)(somatrogon)(h)(c)
| Pediatric growth hormone deficiency | Filed Jan. 2021 | FiledApproved
Feb. 20212022
| FiledApproved
Jan. 20212022
|
Prevnar 2020/Apexxnar (Vaccine)(i)(d) | Immunization to prevent invasive and non-invasive pneumococcal infections (adults) | Approved June 2021 | FiledApproved
Feb. 20212022
| |
TicoVac (Vaccine) | Immunization to prevent tick-borne encephalitis | FiledApproved
Feb.Aug. 2021 | | |
Paxlovid(e)(nirmatrelvir [PF-07321332]; ritonavir) | COVID-19 infection (high risk population) | EUA Dec. 2021 | CMA Jan. 2022 | Approved Feb. 2022 |
Vydura (rimegepant)(f) | Acute migraine | | Approved Apr. 2022 | |
Migraine prevention | | Approved Apr. 2022 | |
*For the U.S., the filing date is the date on which the FDA accepted our submission. For the EU, the filing date is the date on which the EMA validated our submission.
(a)Being developed in collaboration with BioNTech. Prior to BLA, Comirnaty/BNT162b2 for ages 16 and up was available in the U.S. pursuant to an EUA from the FDA on December 11, 2020. In JulyDecember 2021, a supplemental BLA was submitted to the FDA requesting to expand the approval of Comirnaty to include individuals ages 12 through 15 years. In February 2022, following a request from the FDA, a rolling submission seeking to amend the EUA to include children 6 months through 4 years of age (6 months to <5 years of age) was initiated as we wait for data evaluating a third 3 µg dose given at least two months after the second dose of the two-dose series in this age group. A booster dose received EUA from the FDA on September 22, 2021 for individuals 65 years of age and older, individuals 18 through 64 years of age at high risk of severe COVID-19, and individuals 18 through 64 years of age with frequent institutional or occupational exposure to SARS-CoV-2. In addition, in October 2021, the FDA granted Priority Review designationauthorized for emergency use a booster dose to eligible individuals who have completed primary vaccination with a different authorized
COVID-19 vaccine. Subsequently, the BLA for PF-07302048 or BNT162b2FDA expanded the booster EUA: (i) in November 2021 to prevent COVID-19include individuals 18 years of age and older, (ii) in December 2021 to include individuals 16 years of age and older, (iii) in January 2022 to include individuals 12 years of age and older as well as individuals 5 through 11 years of age who have been determined to have certain kinds of immunocompromise and (iv) in March 2022 to include a second booster dose in adults ages 50 years and older who have previously received a first booster of any authorized COVID-19 vaccine and a second booster dose for individuals 12 years of age and older who have been determined to have certain kinds of immunocompromise and who have received a first booster dose of any authorized COVID-19 vaccine. A booster dose received conditional marketing authorization from the EMA in October 2021 for individuals 18 years of age and older and may be given to individuals 5 years and older with a severely weakened immune system, at least 28 days after their second dose. Subsequently, the EMA expanded the booster CMA in February 2022 to include individuals 12 years of age and older. The PDUFA goal dateA booster dose received approval in Japan in November 2021 for a decision by18 years of age and older. In April 2022, we and BioNTech submitted an application to the FDA is in January 2022.for EUA of a booster dose for children 5 through 11 years of age.
(b)Being developed in collaboration with Merck KGaA, Germany.Myovant. In May 2022, the FDA extended the review period for the sNDA for Myfembree (relugolix fixed dose combination) for the management of moderate to severe pain associated with endometriosis. The FDA requires extended time to review additional information requested by the FDA from the companies regarding bone mineral density. The extended Prescription Drug User Fee Act goal date is August 6, 2022.
(c)Erbitux® is a registered trademark of ImClone LLC. In the EU, we are developing in collaboration with the Pierre Fabre Group. In Japan, we are developing in collaboration with Ono Pharmaceutical Co., Ltd.
(d)Being developed in collaboration with Astellas.
(e)The FDA has notified the company that it will not meet the PDUFA goal dates for the New Drug Application for abrocitinib and the supplemental New Drug Application for Xeljanz/Xeljanz XR (tofacitinib). The FDA cited its ongoing review of Pfizer's post-marketing safety study, ORAL Surveillance, evaluating tofacitinib in rheumatoid arthritis patients, as a factor for the extensions.
(f)Being developed in collaboration with Lilly. In March 2021, the FDA Joint Arthritis Advisory Committee and Drug Safety and Risk Management Advisory Committee on tanezumab resulted in a 19:1 against vote on whether the proposed risk evaluation and mitigation strategy (REMS) for tanezumab will ensure benefits outweigh risks.
(g)Being developed in collaboration with Myovant.
(h)Being developed in collaboration with OPKO. In January 2022, Pfizer and OPKO received a Complete Response Letter (CRL) from the FDA for the BLA for somatrogon. Discussions are ongoing with the FDA regarding the CRL and how to best address their concerns.
(i)(d)TheIn October 2021, the CDC’s ACIP voted to recommend Prevnar 20 for routine use in adults. Specifically, the ACIP voted to recommend the following: (i) adults 65 years of age or older who have not previously received a pneumococcal conjugate vaccine or whose previous vaccination history is expected to meetunknown should receive a pneumococcal conjugate vaccine (either pneumococcal 20-valent conjugate vaccine (PCV20) or pneumococcal 15-valent conjugate vaccine (PCV15)). If PCV15 is used, this should be followed by a dose of pneumococcal polysaccharide vaccine (PPSV23); and (ii) adults aged 19 years of age or older with certain underlying medical conditions or other risk factors who have not previously received a pneumococcal conjugate vaccine or whose previous vaccination history is unknown should receive a pneumococcal conjugate vaccine (either PCV20 or PCV15). If PCV15 is used, this should be followed by a dose of PPSV23. The recommendations were published in Octoberthe Morbidity and Mortality Weekly Report on January 28, 2022. The publication also notes “for adults who have received pneumococcal conjugate vaccine (PCV13) but have not completed their recommended pneumococcal vaccine series with PPSV23, one dose of Prevnar 20 may be used if PPSV23 is not available.”
(e)In December 2021, to discuss and update recommendations on the safe and appropriateFDA authorized the emergency use of pneumococcal vaccinesPaxlovid for the treatment of mild-to-moderate COVID-19 in adults.adults and pediatric patients (12 years of age and older weighing at least 40 kg [88 lbs]) with positive results of direct SARS-CoV-2 viral testing, and who are at high risk for progression to severe COVID-19, including hospitalization or death. In January 2022, the EMA approved the CMA of Paxlovid for treating COVID-19 in adults who do not require supplemental oxygen and who are at increased risk of the disease becoming severe.
(f)Under a commercialization arrangement with Biohaven.
In December 2021, in light of the results from the completed required postmarketing safety study of Xeljanz, ORAL Surveillance (A3921133), the U.S. label for Xeljanz was revised. In addition, at the request of the EC, the PRAC of the EMA has adopted a referral procedure under Article 20 of Regulation (EC) No 726/2004 to assess safety information relating to oral JAK inhibitors authorized for inflammatory diseases, including Xeljanz and Cibinqo, which is ongoing. For additional information, see Item 1A. Risk Factors—Post-Authorization/Approval Data and the Product Development sections of our 2021 Form 10-K.
In China, the following products received regulatory approvals in the last twelve months: Cresemba for fungal infection and Besponsa for second line acute lymphoblastic leukemia, both in December 2021; Paxlovid for COVID-19 infection in February 2022; Cibinqo for atopic dermatitis in April 2022.
The following provides information about additional indications and new drug candidates in late-stage development:
| | | | | | | | |
| PRODUCT/CANDIDATE | PROPOSED DISEASE AREA |
LATE-STAGE CLINICAL PROGRAMS FOR ADDITIONAL USES AND DOSAGE FORMS FOR IN-LINE AND IN-REGISTRATION PRODUCTS | Bavencio (avelumab)(a)
| First-line NSCLC |
Ibrance (palbociclib)(b)(a) | ER+/HER2+ metastatic breast cancer |
Xtandi (enzalutamide)(c)(b) | Non-metastatic high-risk castration sensitive prostate cancer |
Talzenna (talazoparib) | Combination with Xtandi (enzalutamide) for first-line mCRPC |
Combination with Xtandi (enzalutamide) for DNA Damage Repair (DDR)-deficient mCSPC |
PF-06482077 (Vaccine) | InvasiveImmunization to prevent invasive and non-invasive pneumococcal infections (pediatric) |
somatrogon (PF-06836922)(d)(c) | Adult growth hormone deficiency |
tanezumab(e)
| Cancer pain |
Braftovi (encorafenib) and Erbitux® (cetuximab)(f)(d) | First-line BRAFv600E-mutant mCRC |
Myfembree Relugolix(relugolix fixed dose combinationcombination)(g)(e)
| Combination with estradiol and norethindrone acetate for endometriosis |
Combination with estradiol and norethindrone acetate for contraceptive efficacy |
Braftovi (encorafenib) and Mektovi (binimetinib) and Keytruda® (pembrolizumab)(h)(f) | BRAFv600E-mutant metastatic or unresectable locally advanced melanoma |
PF-07302048/BNT162b2 (Pfizer/BioNTech COVID-19 vaccine)Comirnaty(i)/BNT162b2
(PF-07302048)(g) | Immunization to prevent COVID-19 Infection (children 2 to 11<5 years of age) |
Immunization to prevent COVID-19 Infection (infants 6 months to <24 months) |
PF-07302048/BNT162b2 boosterPaxlovid (nirmatrelvir [PF-07321332]; ritonavir)(i)(h)
| COVID-19 Infectioninfection (standard risk population) |
COVID-19 infection (post exposure prophylaxis) |
| COVID-19 infection (pediatric) |
NEW DRUG CANDIDATES IN LATE-STAGE DEVELOPMENT | aztreonam-avibactam (PF-06947387) | Treatment of infections caused by Gram-negative bacteria |
fidanacogene elaparvovec (PF-06838435)(j)(i) | Hemophilia B |
giroctocogene fitelparvovec (PF-07055480)(k)(j) | Hemophilia A |
PF-06425090 (Vaccine)(k) | PrimaryImmunization to prevent primary clostridioides difficile infection |
PF-06886992 (Vaccine) | SerogroupsImmunization to prevent serogroups meningococcal infection (adolescent and young adults) |
PF-06928316 (Vaccine) | RespiratoryImmunization to prevent respiratory syncytial virus infection (maternal) |
Immunization to prevent respiratory syncytial virus infection (older adults) |
PF-07265803 | Dilated cardiomyopathy due to Lamin A/C gene mutation |
ritlecitinib (PF-06651600) | Alopecia areata |
sasanlimab (PF-06801591) | Combination with Bacillus Calmette-Guerin for non-muscle-invasive bladder cancer |
fordadistrogene movaparvovec (PF-06939926) | Duchenne muscular dystrophy |
marstacimab (PF-06741086) | Hemophilia |
elranatamab (PF-06863135) | Multiple myeloma, double-class exposed |
Omicron-based mRNA vaccine(l) | Immunization to prevent COVID-19 (adults) |
Etrasimod (PF-07915503) | Ulcerative colitis (moderately to severely active) |
(a)Being developed in collaboration with Merck KGaA, Germany.The Alliance Foundation Trials, LLC.
(b)Being developed in collaboration with the Alliance Foundation Trial.Astellas.
(c)Being developed in collaboration with Astellas.OPKO.
(d)Being developed in collaboration with OPKO.
(e)Being developed in collaboration with Lilly.
(f)Erbitux® is a registered trademark of ImClone LLC. In the EU, we are developing in collaboration with the Pierre Fabre Group. In Japan, we are developing in collaboration with Ono Pharmaceutical Co., Ltd.
(g)(e)Being developed in collaboration with Myovant.
(h)(f)Keytruda® is a registered trademark of Merck Sharp & Dohme Corp. In the EU, we are developing in collaboration with the Pierre Fabre Group. In Japan, we are developing in collaboration with Ono Pharmaceutical Co., Ltd.
(i)(g)Being developed in collaboration with BioNTech.
(j)(h)In April 2022, Pfizer shared top-line results from the Phase 2/3 EPIC-PEP (Evaluation of Protease Inhibition for COVID-19 in Post-Exposure Prophylaxis) study in adults living in the same household as someone with a confirmed COVID-19 infection observing a risk reduction of 32% and 37% in adults who received Paxlovid for five and ten days, respectively, to prevent infection. These results, however, were not statistically significant and, as such, the primary endpoint of reducing the risk of confirmed and symptomatic COVID-19 infection in adults who had been exposed to the virus through a household contact was not met. For additional information on Paxlovid, please see the COVID-19 Pandemic section of this MD&A.
(i)Being developed in collaboration with Spark Therapeutics, Inc.
(k)(j)Being developed in collaboration with Sangamo Therapeutics, Inc.
(k)In March 2022, Pfizer announced results from the CLOVER trial, a pivotal Phase 3 study evaluating its Clostridioides difficile (C. difficile) vaccine candidate (PF-06425090) in the prevention of C. difficile infection (CDI). Initial analyses of two protocol defined secondary endpoints indicated a favorable benefit in reducing CDI severity and 100% vaccine efficacy in preventing medically attended CDI, although the trial did not meet its pre-specified primary endpoint of prevention of primary CDI. Safety reviews indicated that the investigational vaccine was safe and well tolerated. Pfizer is evaluating next steps for the program in coordination with regulatory agencies.
(l)Being developed in collaboration with BioNTech.
For additional information about our R&D organization, see the Item 1. Business—Research and Development section of our 20202021 Form 10-K.
COSTS AND EXPENSES
| Costs and expenses follow: | | | Three Months Ended | Six Months Ended | | | Three Months Ended |
(MILLIONS) | (MILLIONS) | | July 4, 2021 | | June 28, 2020 | | % Change | | July 4, 2021 | | June 28, 2020 | | % Change | (MILLIONS) | | | April 3, 2022 | | April 4, 2021 | | % Change |
Cost of sales | Cost of sales | | $ | 7,049 | | | $ | 1,826 | | | * | | $ | 11,259 | | | $ | 3,766 | | | * | Cost of sales | | | $ | 9,984 | | | $ | 4,157 | | | * |
Percentage of Revenues | Percentage of Revenues | | 37.1 | % | | 18.5 | % | | 33.6 | % | | 18.9 | % | | Percentage of Revenues | | | 38.9 | % | | 28.6 | % | |
Selling, informational and administrative expenses | Selling, informational and administrative expenses | | 2,928 | | | 2,659 | | | 10 | | | 5,712 | | | 5,200 | | | 10 | | Selling, informational and administrative expenses | | | 2,593 | | | 2,777 | | | (7) | |
Research and development expenses | Research and development expenses | | 2,459 | | | 2,078 | | | 18 | | | 4,473 | | | 3,750 | | | 19 | | Research and development expenses | | | 2,301 | | | 1,994 | | | 15 | |
Acquired in-process research and development expenses | | Acquired in-process research and development expenses | | | 355 | | | 19 | | | * |
Amortization of intangible assets | Amortization of intangible assets | | 931 | | | 869 | | | 7 | | | 1,802 | | | 1,718 | | | 5 | | Amortization of intangible assets | | | 835 | | | 858 | | | (3) | |
Restructuring charges and certain acquisition-related costs | Restructuring charges and certain acquisition-related costs | | (1) | | | 360 | | | * | | 22 | | | 414 | | | (95) | | Restructuring charges and certain acquisition-related costs | | | 192 | | | 22 | | | * |
Other (income)/deductions—net | Other (income)/deductions—net | | (998) | | | (955) | | | 5 | | | (2,001) | | | (764) | | | * | Other (income)/deductions—net | | | 350 | | | (1,004) | | | * |
* Indicates calculation not meaningful or results are equal to or greater than 100%. | * Indicates calculation not meaningful or results are equal to or greater than 100%. | * Indicates calculation not meaningful or results are equal to or greater than 100%. |
Cost of Sales
Cost of sales increased $5.2$5.8 billion, in the second quarter and $7.5 billion in the first six months of 2021, primarily due to:
•the impact of BNT162b2,Comirnaty, which includes a charge for the 50% gross profit split with BioNTech and applicable royalty expenses; and
•the unfavorableimpact of Paxlovid,
partially offset by:
•the favorable impact of foreign exchange and hedging activity on intercompany inventory; and
•increased sales volumes of other products, driven mostly by Pfizer CentreOne.rates.
The increase in Cost of sales as a percentage of revenues in the second quarter and in the first six months of 2021, compared to the same periods in 2020, was primarily due to allthe impact of the factorsComirnaty as discussed above, partially offset by the favorable impact of Paxlovid, foreign exchange rates, and an increase in alliance revenues, which have no associated cost of sales.
Selling, Informational and Administrative (SI&A) Expenses
SI&A expenses increased $269decreased $184 million, in the second quarter of 2021, mostly due to:
•increased product-related spending across multiple therapeutic categories and other costs associated with a return to more normal activity levels compared to the prior-year quarter; and
•the unfavorable impact of foreign exchange,
partially offset by:
•lower spending for corporate enabling functions; and
•lower spending on Chantix following the loss of patent protection in the U.S. in November 2020.
SI&A expenses increased $511 million in the first six months of 2021, mostly due to:
•increased product-related spending across multiple therapeutic categories and other costs associated with a return to more normal activity levels compared to the prior-year quarter;
•an increase to expense resulting from the increasedecrease in our liability to be paid to participants of our supplemental savings plan;
•lower spending within the unfavorable impact of foreign exchange;Biopharma segment, excluding COVID-19 products; and
•costs related to BNT162b2, driven by a higher provision for healthcare reform fees based on sales,the favorable impact of foreign exchange,
partially offset by:
•lowerincreased spending on Chantix following the loss of patent protection in the U.S. in November 2020.Paxlovid and Comirnaty.
Research and Development (R&D) Expenses
R&D expenses increased $381$307 million in the second quarterprimarily driven by increased investments across multiple late-stage clinical programs, as well as additional spending on programs to prevent and $723treat COVID-19.
Acquired In-Process Research and Development (IPR&D) Expenses
Acquired IPR&D expenses increased $336 million in the first six months of 2021, primarilylargely due to:
•incremental investments across multiple therapeutic categories, including additional spending relatedan upfront payment to development of BNT162b2Biohaven and therapeutics to help treat COVID-19, as well asa premium paid on our equity investment in Biohaven; and
•a charge for IPR&D relatedpremium paid on our equity investment in BioNTech to an asset acquisition completed in the second quarter of 2021,
partially offset by:
•the non-recurrence of upfront payments to Valneva and BioNTech.develop a potential mRNA vaccine against shingles.
Amortization of Intangible Assets
Amortization of intangible assets increased $62decreased $24 million, in the second quarter and $85 million in the first six months of 2021, primarily as a result of lower amortization of capitalized BNT162b2Comirnaty sales milestones to BioNTech.
Restructuring Charges and Other Costs Associated with Acquisitions and Cost-Reduction/Productivity Initiatives
Transforming to a More Focused Company Program
––For a description of our program, as well as the anticipated and actual costs, see Note 3. The program savings discussed below may be rounded and represent approximations. In connection with the costs primarily related to therestructuring our corporate enabling functions, initiatives, we expect gross cost savings of $1.0 billion, or net cost savings, excluding merit and inflation growth and certain real estate cost increases, of $700 million, to be achieved primarily from 2021 through 2022. In connection with manufacturing network optimization, including legacy cost reduction initiatives,transforming our marketing strategy, we expect net cost savings of $300$1.3 billion, to be achieved primarily from 2022 through 2024. In connection with manufacturing network optimization, we expect net cost savings of $550 million to be achieved primarily from 2020 through 2022.2023.
Certain qualifying costs for this program were recorded in the first two quarters of 20212022 and 20202021 and are reflected as Certain Significant Items and excluded from our non-GAAP measure of Adjusted Income. See the Non-GAAP Financial Measure: Adjusted Income section of this MD&A.
In addition to this program, we continuously monitor our operations for cost reduction and/or productivity opportunities, especially in light of the losses of exclusivity and the expiration of collaborative arrangements for various products.
Other (Income)/Deductions—Net
Other income—net increased $43 million in the second quarter of 2021, mainly due to:
•a favorable impact of foreign exchange;
•higher transition services agreement income;
•higher net gains on equity securities;
•higher net gains on asset disposals;
•lower interest expense; and
•higher net periodic benefit credits other than service costs related to pension and postretirement plans,
partially offsetThe period-over-period change was primarily driven by:
•higher legal charges;net losses on equity securities in the first quarter of 2022 versus net gains recognized in the first quarter of 2021; and
•lower income from collaborations.
Other income—net increased $1.2 billion in the first six monthscollaborations, out-licensing arrangements and sales of 2021, mainly due to:
•higher net gains on equity securities;
•higher net periodic benefit credits other than service costs related to pension and postretirement plans;
•higher transition services agreement income;
•higher Consumer Healthcare JV equity method income;
•lower interest expense;
•higher net gains on asset disposals; and
•higher royalty income,
partially offset by:
•higher legal charges.compound/product rights.
See Note 4 for additional information.
PROVISIONPROVISION/(BENEFIT) FOR TAXES ON INCOME
| | | | Three Months Ended | | Six Months Ended | | | | Three Months Ended |
(MILLIONS) | (MILLIONS) | | July 4, 2021 | | June 28, 2020 | | % Change | | July 4, 2021 | | June 28, 2020 | | % Change | (MILLIONS) | | | April 3, 2022 | | April 4, 2021 | | % Change |
Provision for taxes on income | | $ | 1,043 | | | $ | 422 | | | * | | $ | 1,849 | | | $ | 782 | | | * | |
Provision/(benefit) for taxes on income | | Provision/(benefit) for taxes on income | | | $ | 1,172 | | | $ | 808 | | | 45 | |
Effective tax rate on continuing operations | Effective tax rate on continuing operations | | 15.8 | % | | 14.0 | % | | 15.0 | % | | 13.3 | % | | | Effective tax rate on continuing operations | | | 12.9 | % | | 14.2 | % | | |
* Indicates calculation not meaningful or results are equal to or greater than 100%. | |
|
For information about our effective tax rate and the events and circumstances contributing to the changes between periods, as well as details about discrete elements that impacted our tax provisions, see Note 5.
DISCONTINUED OPERATIONS
For information about our discontinued operations, see Note 2A2B.
NON-GAAP FINANCIAL MEASURE: ADJUSTED INCOME
Adjusted income is an alternative measure of performance used by management to evaluate our overall performance in conjunction with otheras a supplement to our GAAP reported performance measures. As such, we believe that investors’ understanding of our performance is enhanced by disclosing this measure. We use Adjusted income, certain components of Adjusted income and Adjusted diluted EPS to present the results of our major operations––the discovery, development, manufacture, marketing, sale and distribution of biopharmaceutical products worldwide––prior to considering certain income statement elements as follows:
| | | | | | | | | | | | | | |
Measure | | Definition | | Illustrative UseRelevance of Metrics to Our Business Performance |
Adjusted income | | Net income attributable to Pfizer Inc. common shareholders(a) before the impact of purchase accounting for acquisitions,amortization of intangible assets, acquisition-related items, discontinued operations and certain significant items | | •Monthly managerial analysis of our operating resultsProvides investors useful information to: ◦evaluate the normal recurring operational activities, and our annual budgets are prepared using these non-GAAP measurestheir components, on a comparable year-over-year basis ◦assist in modeling expected future performance on a normalized basis •Senior management’s compensation is determined, in part, using these non-GAAP measuresProvides investors insight into the way we manage our budgeting and forecasting, how we evaluate and manage our recurring operations and how we reward and compensate our senior management(b) |
Adjusted cost of sales, Adjusted selling, informational and administrative expenses, Adjusted research and development expenses Adjusted amortization of intangible assets and Adjusted other (income)/deductions––net | | Cost of sales, Selling, informational and administrative expenses, Research and development expenses Amortization of intangible assets and Other (income)/deductions––net (a), each before the impact of purchase accounting for acquisitions,amortization of intangible assets, acquisition-related items, discontinued operations and certain significant items, which are components of the Adjusted income measure | |
Adjusted diluted EPS | | EPS attributable to Pfizer Inc. common shareholders––diluted(a) before the impact of purchase accounting for acquisitions,amortization of intangible assets, acquisition-related items, discontinued operations and certain significant items | |
(a)Most directly comparable GAAP measure.
(b)The short-term incentive plans for substantially all non-sales-force employees worldwide are funded from a pool based on our performance, measured in significant part byversus three budgeted metrics, one of which is Adjusted diluted EPS (as defined for annual incentive compensation purposes), which is derived from Adjusted income and accounts for 40% of the bonus pool funding.funding tied to financial performance. Additionally, the payout for Performance Share Awardsperformance share awards is determined in part by Adjusted net income, which is derived from Adjusted income. Starting withBeginning in the 2020first quarter of 2022, we no longer exclude any expenses for acquired IPR&D from our non-GAAP Adjusted results but we continue to exclude certain of these expenses for our financial results for
annual incentive compensation purposes. The bonus pool funding, which is largely based on financial performance, yearwill be modified by our R&D performance as measured by four metrics relating to our pipeline and consistent with shareholder feedback received in 2019, theperformance against our environmental, social and governance (ESG) metrics and may be further modified by our Compensation CommitteeCommittee’s assessment of the BOD approved adding an R&D pipeline achievement factor to the existing short-term incentive financial metrics.other factors.
Adjusted income and its components and Adjusted diluted EPS are non-GAAP financial measures that have no standardized meaning prescribed by GAAP and, therefore, are limited in their usefulness to investors. Because of their non-standardized definitions, they may not be comparable to the calculation of similar measures of other companies and are presented solely to permit investors to more fully understand how management assesses performance. A limitation of these measures is that they provide a view of our operations without including all events during a period, and do not provide a comparable view of our performance to peers. These measures are not, and should not be viewed as, substitutes for their most directly comparable GAAP measures of Net income attributable to Pfizer Inc. common shareholders, components of Net income attributable to Pfizer Inc. common shareholders and EPS attributable to Pfizer Inc. common shareholders—diluted, respectively. See the accompanying reconciliations of certain GAAP reported to non-GAAP adjusted information for the second quarters and first six months of 2021 and 2020 below.
We also recognize that, as internal measures of performance, these measures have limitations, and we do not restrict our performance-management process solely to these measures. We also use other tools designed to achieve the highest levels of performance. For example, our R&D organization has productivity targets, upon which its effectiveness is measured. In addition, total shareholder return, both on an absolute basis and relative to a publicly traded pharmaceutical index, plays a significant role in determining payouts under certain of our incentive compensation plans.
Purchase Accounting Adjustments
Beginning in the first quarter of 2022, our reconciliation of certain GAAP reported to non-GAAP adjusted information is updated to reflect the following, and prior period information has been revised to conform to the current period presentation:
Adjusted income excludes certain significant purchase accounting impacts resulting from business combinationsIncome and netAdjusted Diluted EPS
Acquired IPR&D—Non-GAAP Adjusted financial measures include expenses for all acquired IPR&D costs incurred in connection with upfront and milestone payments on collaboration and in-license agreements, including premiums on equity securities, as well as asset acquisitions. These impacts can include the incremental charge to cost of sales from the saleacquisitions of acquired inventoryIPR&D. Previously, certain of these items were excluded from our non-GAAP adjusted results. Acquired IPR&D expenses that was written uppreviously would have been excluded from non-GAAP Adjusted income but are now included in both GAAP Reported income and non-GAAP Adjusted income were approximately $339 million pre-tax ($276 million, net of tax), or $0.05 per share, in the first quarter of 2022, and had no impact in the first quarter of 2021.
Amortization of Intangible Assets—We began excluding all amortization of intangibles from non-GAAP Adjusted income, compared to fair value,excluding only amortization of intangibles related to large mergers or acquisitions under the increaseprior methodology, and presenting it as a separate reconciling line. Previously, the adjustment under the prior methodology was included as part of a reconciling line entitled “Purchase accounting adjustments” that we no longer separately present. The impact of this policy change resulted in fair valuebenefits of $0.01 on Adjusted diluted EPS in the acquired finite-lived intangible assets,first quarter of 2022 and to a much lesser extent, depreciation related to$0.02 in the increase/decrease in fair valuefirst quarter of the acquired fixed assets, amortization related to the increase in fair value of acquired debt, and the fair value changes for contingent consideration. Therefore, the 2021.
Acquisition-Related Items—Adjusted income measure includes the revenues earned upon the sale of the acquired products without considering the acquisition cost of those products.
Acquisition-Related Items
Adjusted income excludescontinues to exclude acquisition-related items, which are comprised of transaction, integration, restructuring charges and additional depreciation costs for business combinations because these costs are unique to each transaction and represent costs
that were incurred to restructure and integrate businesses as a result of an acquisition. We have made no adjustments for resulting synergies. Beginning in the first quarter of 2022, acquisition-related items may now include the following purchase accounting impacts that previously would have been included as part of a reconciling line entitled “Purchase accounting adjustments” that we no longer separately present: (i) the incremental charge to cost of sales from the sale of acquired inventory that was written up to fair value, (ii) depreciation related to the increase/decrease in fair value of acquired fixed assets, (iii) amortization related to the increase in fair value of acquired debt and (iv) the fair value changes for contingent consideration.
Discontinued Operations
—Adjusted income excludescontinues to exclude the results of discontinued operations, as well as any related gains or losses on the disposal of such operations. We believe that this presentation is meaningful to investors because, while we review our therapeutic areas and product lines for strategic fit with our operations, we do not build or run our business with the intent to discontinue parts of our business. Restatements due to discontinued operations do not impact compensation or change the Adjusted income measure for the compensation in respect of the restated periods, but are presented for consistency across all periods.
Certain Significant Items
—Adjusted income excludescontinues to exclude certain significant items representing substantive and/or unusual items that are evaluated individually on a quantitative and qualitative basis. Certain significant items may be highly variable and difficult to predict. Furthermore, in some cases it is reasonably possible that they could reoccur in future periods. For example, although major non-acquisition-related cost-reduction programs are specific to an event or goal with a defined term, we may have subsequent programs based on reorganizations of the business, cost productivity or in response to LOE or economic conditions. Legal charges to resolve litigation are also related to specific cases, which are facts and circumstances specific and, in some cases, may also be the result of litigation matters at acquired companies that were inestimable, not probable or unresolved at the date of acquisition. Gains and losses on equity securities, and pension and postretirement actuarial
remeasurement gains and losses have a very high degree of inherent market volatility, which we do not control and cannot predict with any level of certainty and because we do not believe including these gains and losses assists investors in understanding our business or is reflective of our core operations and business. Unusual items represent items that are not part of our ongoing business; items that, either as a result of their nature or size, we would not expect to occur as part of our normal business on a regular basis; items that would be non-recurring; or items that relate to products we no longer sell. For
See the Reconciliations of GAAP Reported to Non-GAAP Adjusted information—Certain Line Items below for a non-inclusive list of certain significant items seeand the Details of Income Statement Items Included in GAAP Reported but Excluded from Non-GAAP Adjusted Income below.
Beginning in 2021, we exclude pension and postretirement actuarial remeasurement gains and losses from our measure of Adjusted income because of their inherent market volatility, which we do not control and cannot predict with any level of certainty and because we do not believe including these gains and losses assists investors in understanding our business or is reflective of our core operations and business.
Also, see theNon-GAAP Financial Measure: Adjusted Income section of the MD&AManagement’s Discussion and Analysis of our 2020Financial Condition and Results of Operations in Pfizer’s 2021 Annual Report on Form 10-K for additional information.
Reconciliations of GAAP Reported to Non-GAAP Adjusted Information––Certain Line Items
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended July 4, 2021 |
(MILLIONS, EXCEPT PER COMMON SHARE DATA) | | GAAP Reported | | Purchase Accounting Adjustments(a) | | Acquisition-Related Items(a) | | Discontinued Operations(a) | | Certain Significant Items(a) | | Non-GAAP Adjusted |
Revenues | | $ | 18,977 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 18,977 | |
Cost of sales | | 7,049 | | | 6 | | | — | | | — | | | (57) | | | 6,997 | |
Selling, informational and administrative expenses | | 2,928 | | | (1) | | | — | | | — | | | (135) | | | 2,792 | |
Research and development expenses | | 2,459 | | | 1 | | | — | | | — | | | (188) | | | 2,273 | |
Amortization of intangible assets | | 931 | | | (762) | | | — | | | — | | | — | | | 169 | |
Restructuring charges and certain acquisition-related costs | | (1) | | | — | | | (3) | | | — | | | 4 | | | — | |
(Gain) on completion of Consumer Healthcare JV transaction | | — | | | — | | | — | | | — | | | — | | | — | |
Other (income)/deductions––net | | (998) | | | (37) | | | — | | | — | | | 460 | | | (575) | |
Income from continuing operations before provision for taxes on income | | 6,609 | | | 793 | | | 3 | | | — | | | (83) | | | 7,321 | |
Provision for taxes on income(b) | | 1,043 | | | 167 | | | 1 | | | — | | | — | | | 1,212 | |
Income from continuing operations | | 5,565 | | | 625 | | | 3 | | | — | | | (84) | | | 6,110 | |
Income from discontinued operations––net of tax | | 24 | | | — | | | — | | | (24) | | | — | | | — | |
Net income attributable to noncontrolling interests | | 26 | | | — | | | — | | | — | | | — | | | 26 | |
Net income attributable to Pfizer Inc. common shareholders | | 5,563 | | | 625 | | | 3 | | | (24) | | | (84) | | | 6,084 | |
Earnings per common share attributable to Pfizer Inc. common shareholders––diluted | | 0.98 | | | 0.11 | | | — | | | — | | | (0.01) | | | 1.07 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended April 3, 2022 |
Data presented will not (in all cases) aggregate to totals. (MILLIONS, EXCEPT PER COMMON SHARE DATA) | | Cost of sales(a) | | Selling, informational and administrative expenses(a) | | | | | | Other (income)/deductions––net(a) | | | | Net income attributable to Pfizer Inc. common shareholders(a) | | Earnings per common share attributable to Pfizer Inc. common shareholders––diluted |
GAAP reported | | $ | 9,984 | | | $ | 2,593 | | | | | | | | $ | 350 | | | | | $ | 7,864 | | | $ | 1.37 | |
Amortization of intangible assets | | — | | | — | | | | | | | | — | | | | | 835 | | | |
Acquisition-related items(b) | | 4 | | | (1) | | | | | | | | (26) | | | | | 187 | | | |
Discontinued operations(c) | | — | | | — | | | | | | | | — | | | | | 10 | | | |
Certain significant items: | | | | | | | | | | | | | | | | | |
Restructuring charges/(credits) and implementation costs and additional depreciation—asset restructuring(d) | | (20) | | | (74) | | | | | | | | — | | | | | 122 | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
(Gains)/losses on equity securities | | — | | | — | | | | | | | | (698) | | | | | 698 | | | |
Actuarial valuation and other pension and postretirement plan (gains)/losses | | — | | | — | | | | | | | | 72 | | | | | (72) | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
Other(e) | | (10) | | | (23) | | | | | | | | (104) | | | | | 143 | | | |
Income tax provision—non-GAAP items | | | | | | | | | | | | | | | (448) | | | |
Non-GAAP adjusted | | $ | 9,958 | | | $ | 2,496 | | | | | | | | $ | (406) | | | | | $ | 9,338 | | | $ | 1.62 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Six Months Ended July 4, 2021 |
(MILLIONS, EXCEPT PER COMMON SHARE DATA) | | GAAP Reported | | Purchase Accounting Adjustments(a) | | Acquisition-Related Items(a) | | Discontinued Operations(a) | | Certain Significant Items(a) | | Non-GAAP Adjusted |
Revenues | | $ | 33,559 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 33,559 | |
Cost of sales | | 11,259 | | | 11 | | | — | | | — | | | (96) | | | 11,175 | |
Selling, informational and administrative expenses | | 5,712 | | | (1) | | | — | | | — | | | (259) | | | 5,451 | |
Research and development expenses | | 4,473 | | | 3 | | | — | | | — | | | (190) | | | 4,286 | |
Amortization of intangible assets | | 1,802 | | | (1,525) | | | — | | | — | | | — | | | 277 | |
Restructuring charges and certain acquisition-related costs | | 22 | | | — | | | (2) | | | — | | | (20) | | | — | |
(Gain) on completion of Consumer Healthcare JV transaction | | — | | | — | | | — | | | — | | | — | | | — | |
Other (income)/deductions––net | | (2,001) | | | 16 | | | — | | | — | | | 810 | | | (1,175) | |
Income from continuing operations before provision for taxes on income | | 12,291 | | | 1,497 | | | 2 | | | — | | | (244) | | | 13,546 | |
Provision for taxes on income(b) | | 1,849 | | | 354 | | | — | | | — | | | (38) | | | 2,165 | |
Income from continuing operations | | 10,443 | | | 1,143 | | | 1 | | | — | | | (206) | | | 11,381 | |
Income from discontinued operations––net of tax | | 32 | | | — | | | — | | | (32) | | | — | | | — | |
Net income attributable to noncontrolling interests | | 35 | | | — | | | — | | | — | | | — | | | 35 | |
Net income attributable to Pfizer Inc. common shareholders | | 10,440 | | | 1,143 | | | 1 | | | (32) | | | (206) | | | 11,346 | |
Earnings per common share attributable to Pfizer Inc. common shareholders––diluted | | 1.84 | | | 0.20 | | | — | | | (0.01) | | | (0.04) | | | 2.00 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended June 28, 2020 |
(MILLIONS, EXCEPT PER COMMON SHARE DATA) | | GAAP Reported | | Purchase Accounting Adjustments(a) | | Acquisition-Related Items(a) | | Discontinued Operations(a) | | Certain Significant Items(a) | | Non-GAAP Adjusted |
Revenues | | $ | 9,864 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 9,864 | |
Cost of sales | | 1,826 | | | 5 | | | — | | | — | | | (36) | | | 1,795 | |
Selling, informational and administrative expenses | | 2,659 | | | (1) | | | — | | | — | | | (131) | | | 2,528 | |
Research and development expenses | | 2,078 | | | 1 | | | — | | | — | | | (238) | | | 1,841 | |
Amortization of intangible assets | | 869 | | | (798) | | | — | | | — | | | — | | | 71 | |
Restructuring charges and certain acquisition-related costs | | 360 | | | — | | | (21) | | | — | | | (339) | | | — | |
(Gain) on completion of Consumer Healthcare JV transaction | | — | | | — | | | — | | | — | | | — | | | — | |
Other (income)/deductions––net | | (955) | | | (82) | | | — | | | — | | | 595 | | | (442) | |
Income from continuing operations before provision for taxes on income | | 3,026 | | | 874 | | | 21 | | | — | | | 150 | | | 4,071 | |
Provision for taxes on income(b) | | 422 | | | 180 | | | 5 | | | — | | | (17) | | | 591 | |
Income from continuing operations | | 2,604 | | | 694 | | | 16 | | | — | | | 167 | | | 3,481 | |
Income from discontinued operations––net of tax | | 893 | | | — | | | — | | | (893) | | | — | | | — | |
Net income attributable to noncontrolling interests | | 8 | | | — | | | — | | | — | | | — | | | 8 | |
Net income attributable to Pfizer Inc. common shareholders | | 3,489 | | | 694 | | | 16 | | | (893) | | | 167 | | | 3,473 | |
Earnings per common share attributable to Pfizer Inc. common shareholders––diluted | | 0.62 | | | 0.12 | | | — | | | (0.16) | | | 0.03 | | | 0.62 | |
| | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Six Months Ended June 28, 2020 |
(MILLIONS, EXCEPT PER COMMON SHARE DATA) | | GAAP Reported | | Purchase Accounting Adjustments(a) | | Acquisition-Related Items(a) | | Discontinued Operations(a) | | Certain Significant Items(a) | | Non-GAAP Adjusted |
Revenues | | $ | 19,947 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 19,947 | |
Cost of sales | | 3,766 | | | 9 | | | — | | | — | | | (63) | | | 3,712 | |
Selling, informational and administrative expenses | | 5,200 | | | — | | | — | | | — | | | (223) | | | 4,978 | |
Research and development expenses | | 3,750 | | | 3 | | | — | | | — | | | (239) | | | 3,514 | |
Amortization of intangible assets | | 1,718 | | | (1,576) | | | — | | | — | | | — | | | 142 | |
Restructuring charges and certain acquisition-related costs | | 414 | | | — | | | (35) | | | — | | | (379) | | | — | |
(Gain) on completion of Consumer Healthcare JV transaction | | (6) | | | — | | | — | | | — | | | 6 | | | — | |
Other (income)/deductions––net | | (764) | | | (85) | | | — | | | — | | | 145 | | | (704) | |
Income from continuing operations before provision for taxes on income | | 5,868 | | | 1,650 | | | 34 | | | — | | | 752 | | | 8,305 | |
Provision for taxes on income(b) | | 782 | | | 356 | | | 8 | | | — | | | 123 | | | 1,269 | |
Income from continuing operations | | 5,087 | | | 1,294 | | | 26 | | | — | | | 629 | | | 7,036 | |
Income from discontinued operations––net of tax | | 1,774 | | | — | | | — | | | (1,774) | | | — | | | — | |
Net income attributable to noncontrolling interests | | 17 | | | — | | | — | | | — | | | — | | | 17 | |
Net income attributable to Pfizer Inc. common shareholders | | 6,843 | | | 1,294 | | | 26 | | | (1,774) | | | 629 | | | 7,019 | |
Earnings per common share attributable to Pfizer Inc. common shareholders––diluted | | 1.22 | | | 0.23 | | | — | | | (0.32) | | | 0.11 | | | 1.25 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended April 4, 2021 | |
Data presented will not (in all cases) aggregate to totals. (MILLIONS, EXCEPT PER COMMON SHARE DATA) | | Cost of sales(a) | | Selling, informational and administrative expenses(a) | | | | | | Other (income)/deductions––net(a) | | | | Net income attributable to Pfizer Inc. common shareholders(a) | | Earnings per common share attributable to Pfizer Inc. common shareholders––diluted | |
GAAP reported | | $ | 4,157 | | | $ | 2,777 | | | | | | | | $ | (1,004) | | | | | $ | 4,877 | | | $ | 0.86 | | |
Amortization of intangible assets | | — | | | (10) | | | | | | | | (1) | | | | | 870 | | | | |
Acquisition-related items | | 5 | | | (1) | | | | | | | | 53 | | | | | (61) | | | | |
Discontinued operations(c) | | — | | | — | | | | | | | | — | | | | | (9) | | | | |
Certain significant items: | | | | | | | | | | | | | | | | | | |
Restructuring charges/(credits) and implementation costs and additional depreciation—asset restructuring(d) | | (17) | | | (64) | | | | | | | | — | | | | | 105 | | | | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
(Gains)/losses on equity securities | | — | | | — | | | | | | | | 399 | | | | | (399) | | | | |
Actuarial valuation and other pension and postretirement plan (gains)/losses | | — | | | — | | | | | | | | 39 | | | | | (39) | | | | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
Other(e) | | (18) | | | (59) | | | | | | | | (87) | | | | | 167 | | | | |
Income tax provision—non-GAAP items | | | | | | | | | | | | | | | (159) | | | | |
Non-GAAP adjusted | | $ | 4,127 | | | $ | 2,643 | | | | | | | | $ | (601) | | | | | $ | 5,351 | | | $ | 0.95 | | |
(a)For details of adjustments, see Details of Income Statement Items Included inthat reconcile GAAP Reported but Excludedto non-GAAP Adjusted balances are shown pre-tax. Our effective tax rates for GAAP reported income from Non-GAAP Adjusted Incomecontinuing operations were: 12.9% in the three months ended April 3, 2022 and 14.2% in the three months ended April 4, 2021. See Note 5. Our effective tax rates on non-GAAP adjusted income were: 14.8% in the three months ended April 3, 2022 and 15.4% in the three months ended April 4, 2021.
(b)Acquisition-related items in the three months ended April 3, 2022 primarily represent integration and other costs for the acquisition of Arena in March 2022. See Note 2A.
(b)The effective tax rate on Non-GAAP Adjusted income was 16.6% in the second quarter of 2021, compared to 14.5% in the second quarter of 2020. The effective tax rate on Non-GAAP Adjusted income was 16.0% in the first six months of 2021, compared to 15.3% in the first six months of 2020. The increase was due to a change in the jurisdictional mix of earnings primarily related to BNT162b2.
Details of Income Statement Items Included in GAAP Reported but Excluded from Non-GAAP Adjusted Income
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended | | Six Months Ended |
(MILLIONS) | | July 4, 2021 | | June 28, 2020 | | July 4, 2021 | | June 28, 2020 |
Purchase accounting adjustments | | | | | | | | |
Amortization, depreciation and other(a) | | $ | 799 | | | $ | 879 | | | $ | 1,508 | | | $ | 1,659 | |
Cost of sales | | (6) | | | (5) | | | (11) | | | (9) | |
Total purchase accounting adjustments––pre-tax | | 793 | | | 874 | | | 1,497 | | | 1,650 | |
Income taxes(b) | | (167) | | | (180) | | | (354) | | | (356) | |
Total purchase accounting adjustments––net of tax | | 625 | | | 694 | | | 1,143 | | | 1,294 | |
Acquisition-related items | | | | | | | | |
Restructuring charges/(credits)(c) | | — | | | (1) | | | (7) | | | — | |
Transaction costs(c) | | — | | | 11 | | | — | | | 14 | |
Integration costs and other(c) | | 4 | | | 11 | | | 8 | | | 21 | |
| | | | | | | | |
| | | | | | | | |
Total acquisition-related items––pre-tax | | 3 | | | 21 | | | 2 | | | 34 | |
Income taxes(b) | | (1) | | | (5) | | | — | | | (8) | |
Total acquisition-related items––net of tax | | 3 | | | 16 | | | 1 | | | 26 | |
Discontinued operations | | | | | | | | |
| | | | | | | | |
| | | | | | | | |
Income from discontinued operations––net of tax(d) | | (24) | | | (893) | | | (32) | | | (1,774) | |
Certain significant items | | | | | | | | |
Restructuring charges/(credits)––cost reduction initiatives(e) | | (4) | | | 339 | | | 20 | | | 379 | |
Implementation costs and additional depreciation––asset restructuring(f) | | 137 | | | 79 | | | 222 | | | 102 | |
Net (gains)/losses on asset disposals(g) | | (58) | | | — | | | (58) | | | — | |
Net (gains)/losses recognized during the period on equity securities(g) | | (798) | | | (696) | | | (1,197) | | | (501) | |
Certain legal matters, net(g) | | 363 | | | 14 | | | 374 | | | 22 | |
| | | | | | | | |
Business and legal entity alignment costs(h) | | 51 | | | 73 | | | 125 | | | 149 | |
Actuarial valuation and other pension and postretirement plan (gains)/losses(i) | | 6 | | | (6) | | | (33) | | | 76 | |
(Gain) on completion of Consumer Healthcare JV transaction(j) | | — | | | — | | | — | | | (6) | |
Other(k) | | 220 | | | 347 | | | 303 | | | 530 | |
Total certain significant items––pre-tax | | (83) | | | 150 | | | (244) | | | 752 | |
Income taxes(b) | | — | | | 17 | | | 38 | | | (123) | |
Total certain significant items––net of tax | | (84) | | | 167 | | | (206) | | | 629 | |
| | | | | | | | |
| | | | | | | | |
Total purchase accounting adjustments, acquisition-related items, discontinued operations and certain significant items––net of tax, attributable to Pfizer Inc. | | $ | 520 | | | $ | (16) | | | $ | 906 | | | $ | 176 | |
(a)Included primarily in Amortization of intangible assets.
(b)Included in Provision for taxes on income. Includes the tax effect of the associated pre-tax amounts, calculated by determining the jurisdictional location of the pre-tax amounts and applying the applicable tax rate.
(c)Included in Restructuring chargesRelates to the previously divested Meridian subsidiary, Mylan-Japan collaboration and certain acquisition-related costs. See Note 3.
(d)Included in Income from discontinued operations––net of tax. Upjohn Business. See Note 2A.2B.
(e)(d)Includes employee termination costs, asset impairments and other exit costs not associated with acquisitions, which are included in Restructuring charges and certain acquisition-related costs. See Note 3.
(f)Relatesrelated to our cost-reduction and productivity initiatives not related to acquisitions (see Note 3). For the second quarter of 2021, primarily included in Cost of sales ($41 million) and Selling, informational and administrative expenses ($96 million). For the first six months of 2021, primarily included in Cost of sales ($62 million) and Selling, informational and administrative expenses ($160 million). For the second quarter of 2020, primarily included in Cost of sales ($14 million) and Selling, informational and administrative expenses ($63 million). For the first six months of 2020, primarily included in Cost of sales ($27 million) and Selling, informational and administrative expenses ($78 million).
(g)Included in Other (income)/deductions—net. associated with acquisitions. See Note 4.3.
(h)Mainly represents costs for consulting, legal, tax and advisory services associated with the internal reorganization of legal entities. For the second quarter of 2021, primarily included in Cost of sales ($16 million) and Selling, informational and administrative expenses ($34 million), and for the first six months of 2021, primarily included in Cost of sales ($32 million) and Selling, informational and administrative expenses ($87 million). For the second quarter of 2020, primarily included in Cost of sales ($19 million) and Selling, informational and administrative expenses ($47 million),and for the first six months of 2020, primarily included in Cost of sales ($30 million), Selling, informational and administrative expenses ($108 million) and Research and development expenses ($11 million).
(i)Included in Other (income)/deductions––net. For the first six months of 2021, includes a $45 million interim actuarial remeasurement pre-tax gain and for the first six months of 2020, includes a $74 million interim actuarial remeasurement pre-tax loss. See Note 1C.
(j)Included in (Gain) on completion of Consumer Healthcare JV transaction. See Note 2B.
(k)(e)For the second quarter of 2021, primarily included in Research and development expenses ($187 million) andthree months ended April 3, 2022, the total Other (income)/deductions––net ($27 million).adjustment of $104 million primarily includes charges for certain legal matters of $79 million. For the first six monthsquarter of 2021, primarily included in Selling, informational and administrative expenses ($12 million), Research and development expenses ($185 million)and Other (income)/deductions––net ($104 million). For the second quarter of 2020, primarily included in Selling, informational and administrative expenses ($21 million), Research and development expenses ($229 million) and Other (income)/deductions––net ($93 million). For the first six months of 2020, primarily included in Selling, informational and administrative expenses ($37 million), Research and development expenses ($230 million) andtotal Other (income)/deductions––net ($257 million). Among other things,adjustment of $87 million primarily includes charges of $49 million representing our equity-method accounting pro rata share of restructuring charges and costs of preparing for separation from GSK recorded by the second quarterGSK Consumer Healthcare JV. The first quarters of 2022 and first six months of 2021 include a charge of $186insignificant reconciling amounts for Research and development expenses.
million for IPR&D related to an asset acquisition completed in the second quarter of 2021. Also, the second quarter of 2021, includes charges of $31 million and the first six months of 2021 includes charges of $81 million recorded in Other (income)/deductions––net, primarilyrepresenting our pro rata share of restructuring and business combination accounting charges recorded by the Consumer Healthcare JV. Among other things, the second quarter of 2020 included charges of $85 million and the first six months of 2020 included charges of $245 million recorded in Other (income)/deductions––net, primarilyrepresenting our pro rata share of restructuring and business combination accounting charges recorded by the Consumer Healthcare JV. The second quarter and first six months of 2020 also included upfront payments of $130 million to Valneva and $72 million to BioNTech, which were recorded to Research and development expenses.ANALYSIS OF THE CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Cash Flows from Continuing Operations
| | | | Six Months Ended | | | | | Three Months Ended | | |
(MILLIONS) | (MILLIONS) | | July 4, 2021 | | June 28, 2020 | | | Drivers of change | (MILLIONS) | | April 3, 2022 | | April 4, 2021 | | | Drivers of change |
Cash provided by/(used in): | Cash provided by/(used in): | | | | | | | | Cash provided by/(used in): | | | | | | | |
Operating activities from continuing operations | Operating activities from continuing operations | | $ | 15,828 | | | $ | 4,829 | | | | The change is driven primarily by higher net income and advance payments in 2021 for BNT162b2 recorded in deferred revenue and the impact of timing of receipts and payments in the ordinary course of business, including an accrual for the gross profit split due to BioNTech, partially offset by a non-cash change in Other Adjustments, net, primarily resulting from an increase in unrealized gains on equity securities. | Operating activities from continuing operations | | $ | 6,541 | | | $ | 4,546 | | | | The change was driven primarily by (i) higher net income adjusted for non-cash items, including an increase from non-cash unrealized losses on equity securities recognized in the first quarter of 2022, compared to unrealized gains recognized in the first quarter of 2021, partially offset by (ii) a decrease in the change in amounts due to BioNTech for the gross profit split for Comirnaty and a decrease in the change in deferred revenues. See Notes 8 and 13C. |
Investing activities from continuing operations | Investing activities from continuing operations | | $ | (9,884) | | | $ | (1,630) | | | | The change is driven mainly by a $10.8 billion increase in purchases of short-term investments with original maturities of greater than three months, partially offset by a $3.0 billion increase in redemptions of short-term investments with original maturities of greater than three months. | Investing activities from continuing operations | | $ | 567 | | | $ | (1,746) | | | | The change was driven mainly by an $8.0 billion increase in redemptions of short-term investments with original maturities of greater than three months and a $4.4 billion increase in net proceeds from short-term investments with original maturities of three months or less, partially offset by $6.2 billion cash paid for the acquisition of Arena, net of cash acquired, and a $2.7 billion increase in purchases of short-term investments with original maturities of greater than three months. |
Financing activities from continuing operations | Financing activities from continuing operations | | $ | (5,364) | | | $ | (4,493) | | | | The change is driven mostly by a $5.2 billion decrease in proceeds from issuances of long-term debt, and a $277 million payment to Viatris in connection with the spin-off of the Upjohn Business, partially offset by a $2.2 billion reduction in principal repayments on long-term debt, a $1.8 billion decrease in payments on short-term borrowings with maturities of three months or less, and an $814 million net reduction in repayments of short-term borrowings with maturities of greater than three months. | Financing activities from continuing operations | | $ | (6,578) | | | $ | (2,807) | | | | The change was driven mostly by $2.0 billion purchases of the Company’s common stock and a $1.6 billion increase in repayments of long-term debt. |
|
Cash Flows from Discontinued Operations
Cash flows from discontinued operations primarily relate to our formerthe previously divested Meridian subsidiary, Mylan-Japan collaboration and Upjohn Business and the Mylan-Japan collaboration (see Note 2A2B). In 2020, investing and financing activities from discontinued operations primarily reflect investments in money market funds with proceeds from issuances of long-term debt.
ANALYSIS OF FINANCIAL CONDITION, LIQUIDITY, CAPITAL RESOURCES AND MARKET RISK
We rely largely on operating cash flows, short-term investments or commercial paper borrowings and long-term debt to provide for our liquidity requirements. We strive to improve cash inflows through working capital efficiencies. Due to our significant operating cash flows, which is a key strength of our liquidity and capital resources and our primary funding source, as well as our financial assets, access to capital markets, revolving credit agreements, and available lines of credit, and revolving credit agreements, we believe that we have, and will maintain, the ability to meet our liquidity needs to support ongoing operations, our capital allocation objectives, and our contractual and other obligations for the foreseeable future. We have takenFor additional information, including information about off-balance sheet arrangements, see the Analysis of Financial Condition, Liquidity, Capital Resources and will continue to take a conservative approach toMarket Risk section within MD&A in our financial investments2021 Form 10-K. For information about the sources and monitoringuses of our liquidity position in response tofunds, as well as our operating cash flows, see our condensed consolidated statements of cash flows, condensed consolidated balance sheets, condensed consolidated statements of equity, and the Analysis of the Condensed Consolidated Statements of Cash Flows within MD&A. For information on our money market changes. Ourfunds, available-for sale-debt securities and long-term debt, investments consist primarily of high-quality, highly liquid, well-diversified available-for-sale debt securities.
see
Note 7
Debt Capacity––Lines of Credit
We have available lines of credit and revolving credit agreements with a group of banks and other financial intermediaries. We typically maintain cash and cash equivalent balances and short-term investments which, together with our available revolving credit facilities, are in excess of our commercial paper and other short-term borrowings. As of July 4, 2021April 3, 2022, we had access to a $7 billion committed U.S. revolving credit facility expiring in 2025.2026, which may be used for general corporate purposes including to support our commercial paper borrowings. In addition to the U.S. revolving credit facility, our lenders have provided us an additional $395$348 million in lines of credit, of which $363$319 million expire within one year. Essentially all lines of credit were unused as of July 4, 2021.April 3, 2022.
Selected MeasuresCapital Allocation Framework
Our capital allocation framework is devised to facilitate (i) the achievement of Liquiditymedical breakthroughs through R&D investments and Capital Resourcesbusiness development activities and (ii) returning capital to shareholders through dividends and share repurchases. See the Overview of Our Performance, Operating Environment, Strategy and Outlook section within MD&A of
| | | | | | | | | | | | | | |
The following presents certain relevant measures of our liquidity and capital resources: |
(MILLIONS, EXCEPT RATIOS) | | July 4, 2021 | | December 31, 2020 |
Selected financial assets(a): | | | | |
Cash and cash equivalents | | $ | 2,372 | | | $ | 1,784 | |
Short-term investments | | 19,328 | | | 10,437 | |
Long-term investments, excluding private equity securities at cost | | 3,834 | | | 2,973 | |
| | 25,533 | | | 15,195 | |
Debt: | | | | |
Short-term borrowings, including current portion of long-term debt | | 3,888 | | | 2,703 | |
Long-term debt | | 35,354 | | | 37,133 | |
| | 39,242 | | | 39,835 | |
Selected net financial liabilities | | $ | (13,709) | | | $ | (24,641) | |
| | | | |
Working capital(b) | | $ | 13,150 | | | $ | 9,147 | |
Ratio of current assets to current liabilities | | 1.37:1 | | 1.35:1 |
| | | | |
our 2021 Form 10-K. In April 2022, our BOD declared a dividend of $0.40 per share, payable on June 10, 2022, to shareholders of record at the close of business on May 13, 2022.
In the first quarter of 2022, we purchased 39 million shares of our common stock at a cost of $2.0 billion under our
(a)publicly announced share purchase plan. See Note 712 in our 2021 Form 10-K and Unregistered Sales of Equity Securities and Use of Proceeds in Part II, Item 2 for a description of certain assets held and for a description of credit risk related tomore information. At April 3, 2022, our financial instruments held.remaining share-purchase authorization was approximately $3.3 billion.
(b)The increase in working capital was primarily driven by an increase in short-term investments due to operating cash flow generation, partially offset by the timing of accruals, cash receipts and payments in the ordinary course of business and capital expenditures.Off-Balance Sheet Arrangements
For information about the sources and uses of our funds, see the Analysis of the Condensed Consolidated Statements of Cash Flows section within MD&A.
For information about credit ratings, LIBOR, global economic conditions, and market risk,off-balance sheet arrangements, see the Analysis of Financial Condition, Liquidity, Capital Resources and Market Risk—Selected Measures of Liquidity and Capital ResourcesRisk sectionwithin MD&A in our 20202021 Form 10-K.
Off-Balance Sheet Arrangements
In the ordinary course of business and in connection with the sale of assets and businesses and other transactions, we often indemnify our counterparties against certain liabilities that may arise in connection with the transaction or that are related to events and activities. For more information on guarantees and indemnifications, see Note 12B.
Additionally, certain In March 2022, in connection with GSK’s previously announced planned demerger, the Consumer Healthcare JV issued notes of our co-promotion or license agreements give our licensors or partners$8.75 billion, €2.35 billion and £700 million with various maturities. GSK has guaranteed the rightsnotes and we have agreed to negotiateindemnify GSK for or in some cases to obtain under certain financial conditions, co-promotion or other rights in specified countries with respect to certain32% of our products.
Share-Purchase Plans and Accelerated Share Repurchase Agreements
At July 4, 2021, our remaining share-purchase authorization was approximately $5.3 billion, with no repurchases in the first six months of 2021.any amount payable by GSK. See Note 122C.
Global Economic Conditions
Beginning in our 2020 Form 10-K forsecond quarter of 2022, our operations in Turkey function in a hyperinflationary economy. The impact to Pfizer is not considered material. For more information on our publicly announced share-purchase plans.about global economic conditions, see the Overview of Our Performance, Operating Environment, Strategy and Outlook—The Global Economic Environment section within this MD&A.
For additional information about our diverse sources of funds, global economic conditions, and information about credit ratings, market risk and LIBOR, see the Analysis of Financial Condition, Liquidity, Capital Resources and Market Risk sectionwithin MD&A in our 2021 Form 10-K.
Dividends on Common Stock
In June 2021, our BOD declared a dividend of $0.39 per share, payable on September 7, 2021, to shareholders of record at the close of business on July 30, 2021. Our current and projected dividends provide a return to shareholders while maintaining sufficient capital to invest in growing our business. Our dividends are not restricted by debt covenants. While the dividend level remains a decision of Pfizer’s BOD and will continue to be evaluated in the context of future business performance, we currently believe that we can support future annual dividend increases, barring significant unforeseen events.
NEW ACCOUNTING STANDARDS
Recently Adopted Accounting Standard
See Note 1B.
| | | | | | | | | | | | | | |
Recently Issued Accounting Standard, Not Adopted as of July 4, 2021April 3, 2022 |
Standard/Description | | Effective Date | | Effect on the Financial Statements |
Reference rate reform provides temporary optional expedients and exceptions to the guidance for contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued after 2021 because of reference rate reform. The new guidance provides the following optional expedients: 1.Simplify accounting analyses under current U.S. GAAP for contract modifications. 2.Simplify the assessment of hedge effectiveness and allow hedging relationships affected by reference rate reform to continue. 3.Allow a one-time election to sell or transfer debt securities classified as held to maturity that reference a rate affected by reference rate reform. | | Elections can be adopted prospectively at any time through December 31, 2022. | | We are assessing the impact, of the provisions ofbut currently do not expect this new guidance to have a material impact on our consolidated financial statements. |
FORWARD-LOOKING INFORMATION AND FACTORS THAT MAY AFFECT FUTURE RESULTS
This Form 10-Q contains forward-looking statements. We also provide forward-looking statements in other materials we release to the public, as well as public oral statements. Given their forward-looking nature, these statements involve substantial risks, uncertainties and potentially inaccurate assumptions.
We have tried, wherever possible, to identify such statements by using words such as “will,” “may,” “could,” “likely,” “ongoing,” “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” “believe,” “assume,” “target,” “forecast,” “guidance,” “goal,” “objective,” “aim,” “seek”“seek,” “potential,” “hope” and other words and terms of similar meaning or by using future dates.
We include forward-looking information in our discussion of the following, among other topics:
•our anticipated operating and financial performance, reorganizations, business plans, strategy and prospects;
•expectations for our product pipeline, in-line products and product candidates, including anticipated regulatory submissions, data read-outs, study starts, approvals, clinical trial results and other developing data, that become available, revenue contribution, growth, performance, timing of exclusivity and potential benefits;
•strategic reviews, capital allocation objectives, dividends and share repurchases;
•plans for and prospects of our acquisitions, dispositions and other business development activities, and our ability to successfully capitalize on these opportunities;
•sales, expenses, interest rates, foreign exchange rates and the outcome of contingencies, such as legal proceedings;
•expectations for impact of or changes to existing or new government regulations or laws;
•our ability to anticipate and respond to macroeconomic, geopolitical, health and industry trends, pandemics, acts of war and other large-scale crises; and
•manufacturing and product supply.
In particular, forward-looking information in this Form 10-Q includes statements relating to specific future actions and effects, including, among others, our efforts to respond to COVID-19, including our development of a vaccine to help prevent COVID-19plans and our investigational protease inhibitors,expectations regarding Comirnaty and Paxlovid, and any potential future vaccines or treatments; the forecasted revenue, contributiondemand, manufacturing and supply of BNT162b2Comirnaty and the potential number of doses that we and BioNTech believe can be manufactured;Paxlovid; our expectations regarding the impact of COVID-19 on our business; the expected impact of patent expiries and competition from generic manufacturers; the expected pricing pressures on our products and the anticipated impact to our business; the availability of raw materials for 2022; the expected charges and/or costs in connection with the spin-off of the Upjohn Business and its combination with Mylan; the benefits expected from our business development transactions; our anticipated liquidity position; the anticipated costs and savings from certain of our initiatives, including our Transforming to a More Focused Company program; anticipated study starts;and our planned capital spending; and the expectations for our quarterly dividend payments.spending.
Given their nature, we cannot assure that any outcome expressed in these forward-looking statements will be realized in whole or in part. Actual outcomes may vary materially from past results and those anticipated, estimated, implied or projected. These forward-looking statements may be affected by underlying assumptions that may prove inaccurate or incomplete, or by known or unknown risks and uncertainties, including those described in this section and in the Item 1A. Risk Factors section in our 20202021 Form 10-K.
Therefore, you are cautioned not to unduly rely on forward-looking statements, which speak only as of the date of this Form 10-Q. We undertake no obligation to update forward-looking statements, whether as a result of new information, future events
or otherwise, except as required by applicable securities law. You are advised, however, to consult any further disclosures we make on related subjects.
Some of the factors that could cause actual results to differ are identified below, as well as those discussed in the Item 1A. Risk Factors section in our 20202021 Form 10-K and within this MD&A. We note these factors for investors as permitted by the Private Securities Litigation Reform Act of 1995. The occurrence of any of the risks identified below or in the Item 1A. Risk Factors section in our 20202021 Form 10-K, or other risks currently unknown, could have a material adverse effect on our business, financial condition or results, of operations, or we may be required to increase our accruals for contingencies. It is not possible to predict or identify all such factors. Consequently, you should not consider the following to be a complete discussion of all potential risks or uncertainties:
Risks Related to Our Business, Industry and Operations, and Business Development:Development
•the outcome of R&D activities, including, the ability to meet anticipated pre-clinical or clinical endpoints, commencement and/or completion dates for our pre-clinical or clinical trials, regulatory submission dates, and/or regulatory approval and/or launch dates; the possibility of unfavorable pre-clinical and clinical trial results, including the possibility of unfavorable new pre-clinical or clinical data and further analyses of existing pre-clinical or clinical data; the risk that pre-clinical and clinical trial data are subject to differing interpretations and assessments, including during the peer review/publication process, in the scientific community generally, and by regulatory authorities; and whether and when additional data from our pipeline programs will be published in scientific journal publications, and if so, when and with what modifications and interpretations;
•our ability to successfully address comments received from regulatory authorities such as the FDA or the EMA, or obtain approval for new products and indications from regulators on a timely basis or at all; regulatory decisions impacting labeling, including the scope of indicated patient populations, product dosage, manufacturing processes, safety and/or other matters, including decisions relating to emerging developments regarding potential product impurities; the impact of recommendations by technical or advisory committees; and the timing of pricing approvals and product launches;
•claims and concerns that may arise regarding the safety or efficacy of in-line products and product candidates, including claims and concerns that may arise from the outcome of post-approval clinical trials, which could impact marketing approval, product labeling, and/or availability or commercial potential, including uncertainties regarding the commercial or other impact of the results of the Xeljanz ORAL Surveillance (A3921133) study or any potential actions by regulatory authorities based on analysis of ORAL Surveillance or other data, including on other Janus kinase (JAK)JAK inhibitors in our portfolio;
•the success and impact of external business development activities, including the ability to identify and execute on potential business development opportunities; the ability to satisfy the conditions to closing of announced transactions in the anticipated time frame or at all; the ability to realize the anticipated benefits of any such
transactions in the anticipated time frame or at all; the potential need for and impact of additional equity or debt financing to pursue these opportunities, which could result in increased leverage and/or a downgrade of our credit ratings; challenges integrating the businesses and operations; disruption to business and operations relationships; risks related to growing revenues for certain acquired products; significant transaction costs; and unknown liabilities;
•competition, including from new product entrants, in-line branded products, generic products, private label products, biosimilars and product candidates that treat or prevent diseases and conditions similar to those treated or intended to be prevented by our in-line products and product candidates;
•the ability to successfully market both new and existing products, including biosimilars;
•difficulties or delays in manufacturing, sales or marketing; supply disruptions, shortages or stock-outs at our facilities or our third party suppliers’ facilities;third-party facilities that we rely on; and legal or regulatory actions;
•the impact of public health outbreaks, epidemics or pandemics (such as the COVID-19 pandemic), including the impact of vaccine mandates where applicable, on our business, operations and financial condition and results, including impacts on our employees, manufacturing, supply chain, sales and marketing, research and developmentR&D and clinical trials;
•risks and uncertainties related to our efforts to develop and commercialize a vaccine to help prevent COVID-19 and potential treatments foran oral COVID-19 treatment, as well as challenges related to their manufacturing, supply and distribution;
•risks related to our ability to achieve our revenue forecasts for Comirnaty and Paxlovid or any potential future COVID-19 vaccines or treatments, including, among other things, whether and when additional supply or purchase agreements will be reached, the risk that demand for any products may be reduced or no longer exist and the possibility that COVID-19 will diminish in severity or prevalence or disappear entirely, which may lead to reduced revenues or excess inventory;
•trends toward managed care and healthcare cost containment, and our ability to obtain or maintain timely or adequate pricing or favorable formulary placement for our products;
•interest rate and foreign currency exchange rate fluctuations, including the impact of possible currency devaluations in countries experiencing high inflation rates;
•any significant issues involving our largest wholesale distributors or government customers, which account for a substantial portion of our revenues;
•the impact of the increased presence of counterfeit medicines or vaccines in the pharmaceutical supply chain;
•any significant issues related to the outsourcing of certain operational and staff functions to third parties; and any significant issues related to our JVs and other third-party business arrangements;
•uncertainties related to general economic, political, business, industry, regulatory and market conditions including, without limitation, uncertainties related to the impact on us, our customers, suppliers and lenders and counterparties to our foreign-exchange and interest-rate agreements of challenging global economic conditions and recent and possible future changes in global financial markets;
•any changes in business, political and economic conditions due to actual or threatened terrorist activity, civil unrest or military action;
•the impact of product recalls, withdrawals and other unusual items, including uncertainties related to regulator-directed risk evaluations and assessments;
•trade buying patterns;
•the risk of an impairment charge related to our intangible assets, goodwill or equity-method investments;
•the impact of, and risks and uncertainties related to, restructurings and internal reorganizations, as well as any other corporate strategic initiatives, and cost-reduction and productivity initiatives, each of which requires upfront costs but may fail to yield anticipated benefits and may result in unexpected costs or organizational disruption;
Risks Related to Government Regulation and Legal Proceedings:Proceedings
•the impact of any U.S. healthcare reform or legislation or any significant spending reductions or cost controls affecting Medicare, Medicaid or other publicly funded or subsidized health programs or changes in the tax treatment of employer-sponsored health insurance that may be implemented;
•U.S. federal or state legislation or regulatory action and/or policy efforts affecting, among other things, pharmaceutical product pricing, intellectual property, reimbursement or access or restrictions on U.S. direct-to-consumer advertising; limitations on interactions with healthcare professionals and other industry stakeholders; as well as pricing pressures for our products as a result of highly competitive insurance markets;
•legislation or regulatory action in markets outside of the U.S., including China, affecting pharmaceutical product pricing, intellectual property, reimbursement or access, including, in particular, continued government-mandated reductions in prices and access restrictions for certain biopharmaceutical products to control costs in those markets;
•the exposure of our operations globally to possible capital and exchange controls, economic conditions, expropriation and other restrictive government actions, changes in intellectual property legal protections and remedies, as well as the impact of political unrest or civil unrest or military action, including the ongoing conflict between Russia and Ukraine and the related economic consequences, unstable governments and legal systems and inter-governmental disputes;
•legal defense costs, insurance expenses, settlement costs and contingencies, including those related to actual or alleged environmental contamination;
•the risk and impact of an adverse decision or settlement and the adequacy of reserves related to legal proceedings;
•the risk and impact of tax related litigation;
•governmental laws and regulations affecting our operations, including, without limitation, changes in laws and regulations or their interpretation, including, among others, changes in tax laws and regulations internationally and in the U.S., including, among others, anypotential adoption of global minimum taxation requirements and potential changes to the existing tax law by the current U.S. Presidential administration and Congress increasing the corporate tax rate and/or the tax rate on foreign earnings;Congress;
Risks Related to Intellectual Property, Technology and Security:Security
•any significant breakdown or interruption of our information technology systems and infrastructure;infrastructure (including cloud services);
•any business disruption, theft of confidential or proprietary information, extortion or integrity compromise resulting from a cyberattack;cyber-attack or other malfeasance by third parties, including, but not limited to, nation states, employees, business partners or others;
•the risk that our currently pending or future patent applications may not be granted on a timely basis or at all, or any patent-term extensions that we seek may not be granted on a timely basis, if at all; and
•our ability to protect our patents and other intellectual property, includingsuch as against claims of invalidity that could result in LOE, including challenges faced by our collaboration or licensing partners to the validity of their patent rights, unasserted intellectual property claims and in response to any pressure, or legal or regulatory action by, various stakeholders or governments that could potentially result in us not seeking intellectual property protection for or agreeing not to enforce or being restricted from enforcing intellectual property related to our products, including our vaccine to help prevent COVID-19 and potential treatments for COVID-19.our oral COVID-19 treatment.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Information required by this item is incorporated by reference from the discussion in the Analysis of Financial Condition, Liquidity, Capital Resources and Market Risk—Selected Measures of Liquidity and Capital Resources—Market Risk section within MD&A of our 20202021 Form 10-K.
ITEM 4. CONTROLS AND PROCEDURES
As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our principal executive officer and principal financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Based on this evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures are effective in alerting them in a timely manner to material information required to be disclosed in our periodic reports filed with the SEC.
During our most recent fiscal quarter, there has not been any change in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
| | |
PART II. OTHER INFORMATION |
ITEM 1. LEGAL PROCEEDINGS
Certain legal proceedings in which we are involved are discussed in Note 12A.
ITEM 1A. RISK FACTORS
We refer to the “OurOverview of Our Performance, Operating Environment”, “TheEnvironment, Strategy and Outlook—Our Operating Environment and —The Global Economic Environment”, “COVID-19 Pandemic”Environment sections and “Forward-Lookingthe Forward-Looking Information and Factors That May Affect Future Results” sectionsResults section of the MD&A of this Form 10-Q and to Part I, Item 1A, “Risk Factors” of our 20202021 Form 10-K and to the Item 1A. Risk Factors section of our 2021 Form 10-K.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
The following summarizes purchases of our common stock during the secondfirst quarter of 2021:2022:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Period | | Total Number of Shares Purchased(a) | | Average Price Paid per Share(a) | | Total Number of Shares Purchased as Part of Publicly Announced Plan | | Approximate Value of Shares That May Yet Be Purchased Under the Plan(b) |
April 5 through May 2, 2021 | | 42,590 | | | $ | 37.84 | | | — | | | $ | 5,292,881,709 | |
May 3 through May 30, 2021 | | 104,104 | | | $ | 40.04 | | | — | | | $ | 5,292,881,709 | |
May 31 through July 4, 2021 | | 26,950 | | | $ | 39.07 | | | — | | | $ | 5,292,881,709 | |
Total | | 173,644 | | | $ | 39.35 | | | — | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Period | | Total Number of Shares Purchased(a) | | Average Price Paid per Share(a) | | Total Number of Shares Purchased as Part of Publicly Announced Plan(b) | | Approximate Value of Shares That May Yet Be Purchased Under the Plan(b) |
January 1 through January 30, 2022 | | 13,741 | | | $ | 58.40 | | | — | | | $ | 5,292,881,709 | |
January 31 through February 27, 2022 | | 9,581,474 | | | $ | 46.91 | | | — | | | $ | 5,292,881,709 | |
February 28 through April 3, 2022 | | 41,650,890 | | | $ | 50.86 | | | 39,139,431 | | | $ | 3,292,882,444 | |
Total | | 51,246,105 | | | $ | 50.12 | | | 39,139,431 | | | |
(a)RepresentsIn addition to amounts purchased under our share repurchase program, these columns represent (i) 168,61212,104,268 shares of common stock surrendered to the Company to satisfy tax withholding obligations in connection with the vesting of awards under our long-term incentive programs and (ii) the open market purchase by the trustee of 5,0322,406 shares of common stock in connection with the reinvestment of dividends paid on common stock held in trust for employees who deferred receipt of performance share awards.
(b)See Note 12 in our 20202021 Form 10-K10-K.
ITEM 6. EXHIBITS
| | | | | | | | | | | |
| | - | Certification by the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
| | - | Certification by the Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
| | - | Certification by the Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
| | - | Certification by the Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
| Exhibit 101: | | |
| EX-101.INS | | XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. |
| EX-101.SCH EX-101.CAL EX-101.LAB EX-101.PRE EX-101.DEF | | Inline XBRL Taxonomy Extension Schema Inline XBRL Taxonomy Extension Calculation Linkbase Inline XBRL Taxonomy Extension Label Linkbase Inline XBRL Taxonomy Extension Presentation Linkbase Inline XBRL Taxonomy Extension Definition Document |
| Exhibit 104 | | Cover Page Interactive Data File––the cover page interactive data file does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. |
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| | | | | | | | |
| | Pfizer Inc. |
| | (Registrant) |
| | |
| | |
Dated: | August 12, 2021May 11, 2022 | /s/ Jennifer B. Damico |
| | Jennifer B. Damico Senior Vice President and
Controller (Principal Accounting Officer and Duly Authorized Officer) |